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Summarised by Centrist
The head of the International Energy Agency has warned that global oil stockpiles are being depleted rapidly as conflict involving Iran disrupts energy shipments through the Strait of Hormuz.
Fatih Birol, executive director of the Paris-based agency, said commercial reserves were falling quickly and warned current stockpiles may only last “several weeks” at current depletion rates.
Around a fifth of the world’s oil and gas normally passes through the Strait of Hormuz, but shipping has been disrupted by the conflict involving Iran and the United States. The IEA has described it as the largest disruption to crude supplies in history.
Brent crude rose above US$110 a barrel and is now more than 50 per cent higher than before the conflict began. Petrol prices in Britain have climbed close to levels seen during the 2022 energy crisis following Russia’s invasion of Ukraine.
According to the report, global oil supply has fallen by nearly 13 million barrels per day since February. The IEA has already authorised its largest-ever emergency release of government reserves, adding 2.5 million barrels per day to markets, but Birol warned emergency reserves were “not endless”.
G7 finance ministers and central bankers met in Paris to discuss the economic risks posed by the conflict, including inflation and energy security. The US Treasury also announced temporary sanctions waivers for some Russian oil exports intended to ease pressure on global supply.
Markets are increasingly pricing in the possibility of further interest rate increases as higher energy prices feed through into inflation. Birol warned sustained disruption could have “major implications” for food prices and broader inflation pressures.
The impact is already being felt in parts of the developing world. In Kenya, at least four people died and dozens were injured during protests linked to rising fuel costs.
