(BOE Report) – A recent escalation of hostilities between the U.S. and Iran could upend the International Energy Agency’s forecast of a significant oil market surplus next year, it said on Friday, as global supply jumped in June when the Strait of Hormuz reopened but still lagged pre-war levels.
Global oil markets received some respite last month as a peace agreement between the U.S. and Iran facilitated the opening of the Strait, the effective closure of which had taken out as much as 14 million barrels per day of crude flows during the peak of the largest oil supply crisis in history.
The IEA said global oil supply rose by 4.1 million bpd in June, but remained 9.4 million bpd below pre-war levels.
The agency predicts supply will expand by 7.5 million bpd next year after a 3.7 million bpd contraction this year, but that is contingent on improved Hormuz transits.
“An escalation in hostilities on 7-8 July, however, clouds the outlook and could upend the forecast that sees the market flipping to a surplus next year,” it said, adding that a lasting peace agreement is a “must” for oil markets to normalise.
The IEA’s 2027 forecasts imply that supply will outweigh demand by 4.62 million bpd next year from an 860,000 bpd deficit this year, provided producers can restart fields and refiners can resume normal product shipments.
The Paris-based agency, which advises industrialised nations, sees global oil demand falling by 1 million bpd this year, before rebounding to rise 2 million bpd in 2027.
In the nearer term, it sees the peak summer fuel demand season lifting consumption by around 8 million bpd when compared with May’s low point at the peak of the crisis.
(Reporting by Robert Harvey in London; Editing by Jan Harvey)
