IEA warns of potential oil market crisis this summer

The International Energy Agency (IEA) Executive Director Fatih Birol issued a warning on Thursday about the possibility of the oil market entering a "red zone" during July or August if tensions in the Middle East continue to escalate.

Speaking at the Chatham House research center, Birol explained that oil demand typically rises with the start of the travel season in late June and early July, which increases pressure on supply.

He added that the IEA is prepared to release additional oil reserves into the market if member countries decide to do so, aiming to mitigate any potential disruptions.

IEA's strategic oil reserve releases

In March, the 32 member countries agreed to release 426 million barrels, representing more than one-third of their strategic reserves, in an unprecedented move to stabilize the markets.

The agency highlighted that disruptions to navigation through the Strait of Hormuz, due to regional tensions, have resulted in losses exceeding one billion barrels of Gulf oil exports. This equates to a shortfall of approximately 14 million barrels per day.

Global stockpiles and price outlook

On May 13, the IEA warned of a record decline in global oil inventories amid the ongoing conflict, which could drive prices higher if a swift resolution to the dispute is not reached.

Arne Loman Rasmussen, an analyst at Global Risk Management, commented that oil prices might not fall as much as some expect if the Strait of Hormuz reopens, due to the need to replenish stockpiles and logistical challenges involved.