Oil Demand Expected to Plummet Due to Disruptions from War in Iran

The International Energy Agency (IEA) has revised its forecast for global oil supply and demand growth, citing disruptions in oil flows due to the ongoing conflict between the United States and Iran as a major factor.

According to the IEA’s latest report, global oil demand is expected to decline by 80,000 barrels per day this year, compared to a previously projected increase of 640,000 bpd. The agency attributed this decrease to the impact of the war on oil flows and the subsequent rise in prices, which has led to energy scarcity.

The IEA report noted that several countries have been holding onto energy stocks and imposing export restrictions, which could exacerbate the situation. However, it did not specify which countries were involved.

The agency also reported a significant drop in oil consumption from the Middle East and Asia Pacific regions, particularly for naphtha, LPG, and jet fuel. The report warned that this trend is expected to continue, with a projected 1.5 million bpd decline in demand in the second quarter of this year, marking the deepest contraction since the COVID-19 pandemic.

The Organization of the Petroleum Exporting Countries (OPEC) also lowered its prediction for world oil demand in the second quarter, but maintained its full-year outlook unchanged.

Attacks on energy infrastructure in the Middle East and Iran’s closure of the Strait of Hormuz have led to a significant disruption in global oil supply. The IEA reported that 10.1 million bpd were lost in March due to these disruptions.

The US has announced a blockade on Iranian ports, which is expected to further complicate the situation. The IEA warned that if the strait remains closed, oil demand could plunge even further, leading to significant disruptions in energy markets and economies worldwide.

In contrast, Russia’s crude oil exports have seen an increase due to the surge in prices, with revenues from crude oil and refined products rising by 270,000 bpd last month.

Source: Al Jazeera