The International Energy Agency (IEA) calculates that the closure of the Strait of Hormuz due to the war in the Middle East will cause a collapse in the world’s oil supply of eight million barrels per day in March.
In the monthly report on the oil market published this Thursday, the 12th, the IEA highlights that this conflict is experiencing the biggest supply interruption in history, and states that with an average of 98.8 million barrels per day this month, the output of oil to the market will fall to the level it had in the first quarter of 2022.
This drop would mean a drop of 7.5% in relation to the supply that occurred in February.
According to information available to the agency, the flows that normally passed through the Strait of Hormuz (15 million barrels per day of crude oil and five million barrels per day of petroleum derivatives) were reduced to less than 10%.
These losses can only be compensated in the short term, and only very partially, with an increase in production from some producers that do not belong to the Organization of Petroleum Exporting Countries (OPEC), essentially the United States, Canada, as well as Russia and Kazakhstan, which will recover part of the drop they suffered in February.
The IEA announced on Wednesday that its 32 member countries will withdraw up to 400 million barrels from their strategic reserves, the largest operation of its kind in its history, to try to compensate for the interruption of supply through the Strait of Hormuz and calm the market.
Markets had taken it for granted since Monday that the IEA would draw on its strategic reserves, and this had brought down the price of a barrel from the peak it had reached in the early hours of that day (Brent reached US$120 per barrel).
When it became known on Wednesday that the 32 member countries of the IEA will withdraw up to 400 million barrels from their strategic reserves, the barrel momentarily fell to less than 90 dollars.
But in the following hours it went back above 100 dollars due to uncertainties about the duration of the war and how long the Strait of Hormuz will remain blocked, and this morning, at the beginning of the day, Brent was still above 95 dollars per barrel.
In the absence of a quick resolution of the conflict, the agency warns that this partial release of a third of its total strategic reserves “remains a provisional measure” and that the final impact of the conflict on the oil and gas market will depend on the damage to energy infrastructure and the duration of the blockade of that crucial maritime strait.
The IEA estimates that, for the year as a whole, oil supply will rise by an average of 1.1 million barrels per day compared to 2025, to 107.2 million barrels/day, which reflects a very significant downward revision compared to the 2.4 million barrels per day increase it predicted just a month ago, before the war in the Middle East began with the US and Israeli attacks against Iran on February 28.
It will be producers who do not belong to the cartel formed by OPEC and its partners who will fully contribute to this growth, and very particularly the USA and Brazil.
With regard to demand, the authors of the report also significantly corrected expectations downwards, as they predicted that in March and April it would decrease by around one million barrels per day compared to what they calculated in the previous report.
The fundamental reason is that less kerosene is being consumed because air traffic in the Middle East has been largely halted, with implications also for the rest of the world, and because the stoppage of liquefied natural gas (LNG) flows through the Strait of Hormuz has caused severe disruptions in the supply chain for the production of liquefied petroleum gas.
In the medium term, the AIE anticipates a change in consumer behavior around the world due to the increase in fuel prices.
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