MUSCAT : In response to the crisis, IEA member countries have agreed to release 400 million barrels of emergency oil stocks to stabilize the market, the agency said.
The war in the Middle East is creating unprecedented disruptions to crude and product flows through the Strait of Hormuz, with Gulf countries reducing production by at least 10 million barrels per day, the report noted.
It further highlighted that tanker traffic through the crucial waterway has plunged from around 20 mb/d before the conflict to a trickle, with limited alternatives available to bypass the chokepoint. This has forced producers to shut in or curtail production, with crude output losses currently estimated at 8 mb/d and an additional 2 mb/d of condensates and NGLs offline. Major supply cuts are reported in Iraq, Qatar, Kuwait, the UAE and Saudi Arabia.
The IEA said disruptions extend beyond upstream production, with refinery and gas processing operations also affected. “More than 4 mb/d of refining capacity is at risk due to attacks and storage constraints,” the agency said, noting that Gulf exports of refined products and LPG have fallen sharply. Diesel, jet fuel and petrochemical markets are particularly vulnerable to prolonged disruptions.
Global oil supply is expected to drop by 8 mb/d in March, partially offset by higher output from non-OPEC+ producers such as Kazakhstan and Russia. Meanwhile, widespread flight cancellations and disruptions to LPG supplies are projected to curb global oil demand by roughly 1 mb/d during March and April.
The conflict has sent benchmark Brent crude prices soaring, trading near $120 per barrel following strikes on Iranian energy infrastructure, before easing to around $92/bbl at the time of the report.
The IEA highlighted the importance of emergency reserves in mitigating the impact on economies. “IEA member countries have agreed to make 400 million barrels of oil from emergency reserves available to the market,” the report said, adding that the release will provide a significant buffer but is only a stop-gap measure. The agency emphasized that the ultimate impact on oil and gas markets will depend on the duration of shipping disruptions through the Strait of Hormuz, the intensity of attacks, and the protection of shipping and energy infrastructure.
Global oil inventories remain elevated at 8.2 billion barrels, the highest since February 2021, with roughly half held in OECD countries and 15% in China, offering some cushion as markets adjust.
The IEA concluded that adequate insurance and physical protection for shipping, alongside coordinated global measures, will be essential to restoring flows and stabilizing the world’s oil market amid ongoing geopolitical tensions.
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