The chairman of the International Energy Agency (IEA) stated on Thursday, without providing further details, that the oil market may enter the "red zone" in July and August due to the beginning of peak summer fuel demand, a lack of new oil exports from the Middle East, and declining stocks.
The world oil market is about to enter a crucial "red zone" by July or August 2026 due to a major supply shortage. At the London think tank Chatham House, Fatih Birol, Executive Director of the International Energy Agency (IEA), gave this caution. The continuous conflict with Iran is the root of the issue, as it has drastically reduced Middle Eastern oil exports and led to a historic reduction in the world's emergency supplies.
In a speech at Chatham House in London, Fatih Birol stated that although the world had an excess of oil at the start of the oil supply crisis brought on by the Iran War, reserves are now declining.
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To calm markets, the 32-member IEA organised the release of 400 million barrels of oil from strategic reserves in March. According to Birol, that was the biggest such discharge in history, and the supplies are currently reaching the market at a pace of between 2.5 million and 3 million barrels per day.
According to Birol, the IEA is prepared to organise additional releases if needed.
Earlier on May 11, IEA, in a press release, stated, “The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size.”
“Oil markets are global, so the response to major disruptions needs to be global too. Energy security is the founding mandate of the IEA, and I am pleased that IEA Members are showing strong solidarity in taking decisive action together,” said IEA Executive Director Fatih Birol in the agency's statement.
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IEA members hold emergency stockpiles of over 1.2 billion barrels, with a further 600 million barrels of industry stocks held under government obligation. The coordinated stock release is the sixth in the history of the IEA, which was created in 1974. Previous collective actions were taken in 1991, 2005, 2011, and twice in 2022, the press release by IEA further stated.
Approximately 18 million barrels per day of crude and refined products are restricted due to the effective closure of the Strait of Hormuz, the world's most important energy chokepoint. The biggest supply shock in history has resulted from this disturbance, depleting commercial stocks, pushing Brent crude prices beyond $100 per barrel, and necessitating changes to the global economy.
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