Oil markets nearing red zone' as summer travel season nears, warns IEA chief

Oil markets are expected to tighten as stocks dwindle before the summer travel season. Fresh oil exports from the Middle East are described as insufficient, while demand increases. The IEA executive director warned that the market could enter a red zone in July-August without improvements. A key solution to the Iran-related energy shock is described as a full and unconditional reopening of the Strait of Hormuz. The IEA is open to releasing more strategic oil reserves, noting that up to 80% of collective reserves have not been released. The Iran situation is also described as constrained by limited storage capacity and potential industry difficulties. Geopolitics is characterized as dominating energy outcomes, and oil prices are described as set internationally.

"Oil markets will enter the red zone by July and August as stocks dwindle before the summer travel season amid a shortage of fresh oil exports from the Middle East, the executive director of the International Energy Authority warned on Thursday. Fatih Birol added that the most important solution to the Iran war energy shock was a full and unconditional reopening of the strait of Hormuz. Speaking to the London thinktank Chatham House, Birol said it was open to IEA members to release more strategic oil reserves as they had previously in March, and said the IEA stood ready to coordinate."

"As much as 80% of IEA's collective reserves have not been released. He warned that while stocks were eroding, no new oil was coming from the Middle East and the demand was increasing, mainly caused by the travel season. This may be difficult and we may be entering the red zone in July-August if we don't see some improvements, Birol said."

"Adding that he had never seen the dark and long shadow of geopolitics so dominant in the energy sector, Birol also said he feared extremist parties in Europe may opportunistically abuse the coming inflation to argue it represents the failure of existing political systems when, in truth, the price of oil is set internationally. Birol also said that Iran did not have endless storage capacity and its industry would face difficulties."

"The IEA chief has already warned that he regards the oil shock as more dramatic than three previous oil shocks: in 1973, 1979, as well as the 2022 crisis caused by the Russian invasion of Ukraine. He said 14m barrels of oil a day were missing from the market due to the disruption. He saw no prospect of oil production recovering fully for at least a year, including in the United Arab Emirates, and said that some countries heavily dependent on oil revenues to fund their budget, such as Iraq, may find it impossible t"

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