The International Energy Agency states that the risk of oil supply interruption is limited
2023/10/19
The attacks launched by Hamas on Israel over the weekend and Israel's military retaliation have resulted in thousands of deaths and disrupted the oil market, raising concerns that other countries may intervene and disrupt oil transportation in the Middle East region. The region accounts for more than one-third of global sea freight oil transportation.
At the beginning of the conflict, oil prices skyrocketed, but since supply was not immediately interrupted and other countries did not intervene, oil prices have since fallen.
The IEA stated in its monthly report that although the prospects of oil supply being affected are still limited, the deadly attack has prompted traders to include geopolitical risk premiums in their prices. The physical supply has not been directly affected.
IEA stated that due to the current tight balance between supply and demand in the oil market, the institution is ready to take action if necessary to ensure that the market maintains sufficient supply.
However, due to production cuts in Saudi Arabia and Russia, oil prices remain relatively high. The IEA warns that signs of demand disruption are beginning to be seen.
The IEA stated that there is some evidence of large-scale disruption to demand, especially in low-income countries such as Nigeria, Pakistan, and Egypt, as well as signs of accelerated decline in some OECD markets, including the United States. Consumers in developing countries have been hit by the depreciation of their domestic currency relative to the US dollar (crude oil is priced in US dollars) and the cancellation of gasoline subsidies.
Nevertheless, due to the growth in demand from China, India, and Brazil, the IEA expects global oil demand to continue to grow by 2.3 million barrels per day this year, consistent with previous forecasts. However, the agency has lowered its oil demand growth forecast for next year to 900000 barrels per day.
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