The war in the Middle East and disruptions to exports through the strait of Hormuz has led to the shut in of at least 10mn b/d of liquids production, the IEA estimates.
In its monthly Oil Market Report (OMR), published today, the agency said supply losses are concentrated in Iraq, Qatar, Kuwait, the UAE and Saudi Arabia, and that reductions will increase in the absence of a rapid resumption in shipping flows. Iran's retaliations to air strikes by the US and Israel on 28 February has effectively halted oil and gas flows through the strait of Hormuz.
Production losses in the region include about 8mn b/d of crude and 2mn b/d of condensates and NGLs, the IEA said, with around 3mn b/d of refining capacity also closed.
"Shut-in upstream production will take weeks and, in some cases, months, to return to pre-crisis levels depending on the degree of field complexity and the timing for workers, equipment and resources to return to the region," the agency said.
The IEA said there is limited scope for producers outside the Middle East to offset the supply losses. "Given the right signals" an additional 380,000 b/d of US shale output could be brought online by the end of the year, it said, and a postponement to spring maintenance in Canadian oil sands could add 150,000 b/d of incremental supply over the second quarter.
The supply losses from the Mideast Gulf have prompted the agency to sharply reduce its 2026 global liquids supply growth projection by 1.28mn b/d to 1.11mn b/d, with all this coming from non-Opec+ sources. It said the main impact of the losses would be felt by Asian importers, particularly India.
On demand, the agency reduced its oil consumption growth forecast for March and April by more than 1mn b/d and for 2026 by 210,000 b/d to 640,000 b/d.
It said flight cancellations in the Middle East have materially reduced jet fuel consumption, while the loss of LPG and naphtha supplies from the region had forced petrochemical plants to slash production. Generally higher oil prices and a worsening economic outlook are also likely to curb oil demand, the IEA said.
The world has significant amounts of oil in storage to bridge the temporary losses, the IEA said, with global observed inventories at the highest level in five years at more than 8.2bn bl. IEA member countries have agreed to make 400mn bl of emergency reserves available to offset supply losses, but the agency said stocks only provided a stop-gap measure."Adequate insurance mechanisms and physical protection for shipping" are key to the resumption of oil flows through the strait of Hormuz, it said.
