IEA Executive Director statement on oil markets

The IEA is closely monitoring the situation in oil markets following recent developments in the conflict in the Middle East.

The escalation in hostilities affecting the Strait of Hormuz and energy infrastructure in the region increases security of supply concerns and uncertainty over the market outlook. Threats to the Bab el-Mandeb Strait, which has become increasingly important as a route to bypass the Strait of Hormuz, exacerbate these concerns further. 

For the moment, crude oil markets continue to benefit from several cushioning factors.

These include significant supplies from Gulf producers – notably through major efforts by Saudi Arabia and the United Arab Emirates – that are continuing to reach global markets via alternative routes to the Strait of Hormuz, as well as volumes still managing to pass through it. We estimate that Gulf exports are below their late-June highs but are still considerably higher than the levels seen between early March and mid-June.

In addition, oil producers in other regions – notably the United States, Brazil, Venezuela and Kazakhstan – have increased exports, offsetting some of the supply losses from the Gulf. On the demand side, China has played an important role in stabilising markets by reducing its crude oil imports by nearly 50% compared with pre-war levels.

Ongoing emergency stock releases by IEA Member countries continue to provide significant relief to markets. Since the announcement on 11 March of the IEA collective action to make 400 million barrels of oil available to the market, around 290 million barrels have been released by IEA Member countries, with more continuing to flow to the market. IEA countries still hold a substantial volume of emergency stocks in reserve, including over 1 billion barrels of government-controlled stocks.

There is no room for complacency on oil security amid the escalation in hostilities and a continued drawdown of available commercial inventories. Refinery activity and product supplies have not picked up as much as crude deliveries, meaning that markets for refined oil products, including diesel and gasoline, are considerably tighter than those for crude.

In natural gas markets, increased LNG flows from other markets, led by the United States and also Canada, have offset around 70% of the lost supply via the Strait of Hormuz, but further delays in resuming Gulf exports risk keeping markets tighter for longer. This will be felt by all LNG importers, including Europe as it looks to refill its gas storage for next winter.

The IEA continues to maintain that a resolution to the ongoing conflict that includes a full and unconditional reopening of the Strait of Hormuz will be essential to avoid a further deterioration in global energy security.