IEA Chief Warns of Imminent Oil Market Crisis Amid Strait of Hormuz Closure
IEA Executive Director Fatih Birol cautions that the ongoing closure of the Strait of Hormuz could lead to a significant oil market crisis by July or August, emphasizing the need for its immediate reopening.
The International Energy Agency (IEA) has raised alarms over a potential oil market crisis in the coming months due to the prolonged closure of the Strait of Hormuz. IEA Executive Director Fatih Birol emphasized that the most critical solution to the current energy shock is the full and unconditional reopening of this strategic waterway.
Birol highlighted that if the strait remains closed and no new oil supplies emerge from the Middle East, the ongoing depletion of global stockpiles, coupled with increased demand during the summer travel season, could push oil markets into a "red zone" by July or August. He expressed particular concern for developing regions in Asia and Africa, noting that they would bear the brunt of the crisis.
The Strait of Hormuz, through which approximately 20% of the world's oil and liquefied natural gas typically pass, has been virtually shut down since late February due to escalating conflicts in the region. This disruption has led to significant supply losses, with estimates indicating that over 11 million barrels per day of Gulf crude and condensate production are currently curtailed.
In response to the crisis, the IEA has coordinated the release of 400 million barrels from emergency reserves, marking the largest such release in its history. Birol warned that it would likely take considerable time for Middle Eastern oil production and refining capacities to return to pre-war levels. He affirmed that the IEA stands ready to coordinate further strategic oil reserve releases if necessary.
