The International Energy Agency warned in its latest monthly update on Wednesday that oil prices are likely to rise past the summer peak demand period as rapidly dwindling inventories put further pressure on the market.
Global oil supplies fell by a further 1.8 million barrels per day in April, bringing the total loss to 12.8 million barrels per day since the US-Israel-Iran war began on February 28, according to the May Oil Market Report.
“More than 10 weeks since the Middle East war began, global oil stocks are being depleted at a record pace as supply losses from the Strait of Hormuz increase,” the IEA said.
international benchmark brent Futures prices were trading near $107 per barrel on Wednesday. usa crude oil Futures prices were just above $101 per barrel.
The report’s authors also warned of further destruction in demand as a result of the war, predicting a decline of 420,000 barrels per day by the end of 2026, or 104 million barrels from a year earlier.
“Currently the petrochemical and aviation sectors are most affected, but rising prices, a deteriorating economic environment and measures to suppress demand will increasingly impact fuel use,” the IEA said.
Morgan Stanley predicts the market will lose another billion barrels in 2026 as it takes time to restart oil fields, repair refineries and reposition tanker fleets.
“It is neither exaggerated nor controversial that this is the largest oil supply disruption in the history of the oil market,” Martin Lutz, a commodity strategist at Morgan Stanley, told clients in a note Monday.
Saudi Aramco CEO Amin Nasser and International Energy Agency Director-General Fatih Birol used the same words to describe the turmoil.
Year-to-date prices for ICE Brent and WTI crude oil.
In response, commercial and government stockpiles are being released to make up for some of the losses.
OPEC+ has agreed to increase production by 188,000 barrels per day, the group announced on May 3, as it ramped up production in its first meeting since losing major member United Arab Emirates.
The group, which is made up of seven major oil producers, said June’s production increase would be slightly lower than May’s 206,000 barrels per day increase. Sunday’s figures do not include output from the United Arab Emirates, which formally left OPEC on May 1.
The seven countries include Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman.
— CNBC’s Spencer Kimball also contributed to this report.
