Oil price eases but IEA says Middle East tensions heighten global supply risks

15th April 2024 By: Terence Creamer - Creamer Media Editor

Oil price eases but IEA says Middle East tensions heighten global supply risks

Despite a forecast of slowing oil demand and a likely peak in consumption by the end of the decade, the International Energy Agency (IEA) warned on Monday of heightened global oil security risks in the near term, owing to growing tensions in the Middle East.

In a newsletter released only days after the publication of its latest monthly Oil Market Report, the IEA said the spike in Middle East tensions following Iran’s unprecedented air attacks on Israeli military facilities, raised the risk of increased volatility in oil markets.

On April 13, Iran launched around 300 drones, cruise and ballistic missiles towards Israel, the majority of which were intercepted.

The IEA noted that the Brent international oil price benchmark breached the threshold of $90/bl earlier this month and reached its highest level since October 2023 amid the heightened tensions between Israel and Iran.

Brent crude was trading at $89.49 on Monday afternoon, after having risen to over $92/bl on Friday ahead of the attacks.

Israel’s allies have urged it to avoid a response that escalates tensions further in the region. The lower prices on Monday, reflected a market view that downplayed a risk of broader regional escalation.

Meanwhile, the Oil Market Report stated that sustained output curbs by OPEC+ members meant that non-OPEC+ producers, led by the Americas, were expected to continue driving world oil supply growth through 2025.

“Additional volumes from the US, Brazil, Guyana and Canada alone could come close to meeting world oil demand growth for this year and next,” the IEA said.

The report argued, too, that global oil demand growth was in the midst of a slowdown.

The IEA’s latest forecast expects growth to ease to 1.2-million barrels a day this year and 1.1-million barrels a day in 2025, “bringing a peak in consumption by the end of this decade into view”.

“With the strong recovery in demand following the disruptions of the Covid-19 pandemic having largely run its course, structural factors are set to lead to a gradual easing of oil demand growth over the rest of this decade.

“These include continued market share gains by electric vehicles, steady improvements in the fuel economy of vehicles, and efforts in the Middle East to reduce the use of oil for power generation.”