- Global oil supply to drop 4.3 million bpd in 2024 due to West Asia conflicts
- US-Iran ceasefire collapse spurred attacks disrupting key maritime oil routes
- IEA reports oil supply 1.27 million bpd below demand, largest quarterly deficit since 2021
The International Energy Agency warned on Wednesday that the world's oil supply will decrease by 4.3 million barrels per day, or around 4%, this year due to supply disruptions caused by the ongoing battles in the west Asia, further deepening the world's oil market deficit.
A month after the sides signed a memorandum of agreement to halt the war, the US-Iran ceasefire collapsed last month. Since then, Yemen's Houthi rebels, who are associated with Iran, have started attacks in the Red Sea, and tanker attacks in the Strait of Hormuz have resumed.
According to a report by Reuters, the IEA, which advises developed nations, stated in a monthly report that "global oil supply has fallen well below demand due to the Strait of Hormuz shutdown, the US blockade of Iranian exports, attacks within the Bab el-Mandeb Strait and reduced Kazakh CPC Blend exports," adding that drone attacks in the Black Sea also had an impact on exports.
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Compared to the 3.7 million bpd estimate in the IEA's July report, this year's anticipated supply decline will bring overall supply to the Paris-based organisation's lowest estimate for this year, 102.02 million bpd.
In comparison to the 860,000 bpd deficit suggested by the IEA's July predictions, this would place global supply about 1.27 million bpd below demand this year.
According to the IEA, Middle East oil loadings had recovered to 20 million bpd at the beginning of July, roughly in line with pre-war Hormuz traffic. However, later in the month, they fell to 12 million bpd.
The IEA further added that production in the Middle East fell by 8.3 million barrels per day in July compared to 14 million barrels per day during the height of the crisis. "The nascent recovery underway from mid-May narrowed the supply deficit in June, but renewed hostilities undermined trade flows," it stated.
The IEA has revised its July prediction down by 1 million barrels per day to an oil market deficit of 1.8 million barrels per day from July to September.
According to figures from the IEA's annual statistical supplement, which was also released on Wednesday, that would be the biggest quarterly deficit since the fourth quarter of 2021.
Assuming de-escalation in the upcoming months, the agency projects that global production will exceed overall demand by 4.61 million barrels per day in 2027.
After 410 million barrels of total stock decreases since the start of the Iran war, the IEA stated that this excess might enable stocks to return to their February 2026 level by the middle of next year.
In contrast to the nearly 1 million bpd decline observed last month, the IEA now projects a 1.6 million bpd decline in world demand this year.
On the other hand, the Organisation of the Petroleum Exporting Countries, a producer organisation that also revised its projections on Wednesday, continues to anticipate an increase in demand this year. OPEC reports a 580,000 bpd increase in demand; however, this is 200,000 bpd less than previously estimated.
According to the IEA, demand has decreased due to limited supply of refined fuel and rising costs. The worst-hit products are gasoline and naphtha, with Asia and the Middle East suffering the most from year-over-year decreases.
Due to Ukrainian drone assaults on major refineries west of the Urals mountains, Russian oil refining remained near a 20-year low in July at 3.9 million barrels per day.
According to IEA data, Russian oil production in July fell by 100,000 barrels per day to 8.76 million barrels per day, falling short of the goal set by OPEC+, which consists of OPEC plus Russia and its partners.
IEA further stated that global refinery crude processing decreased by 5 million barrels per day in July due to supply shortages that drove refining margins to all-time highs.
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