Demand for oil poised to outstrip supply, warns IEA

(Sharecast News) - War in the Middle East will see demand for oil outstrip supply this year, while prices to continue to spike, the International Energy Agency warned on Wednesday.

Publishing its latest monthly report, the influential Paris-based body said mounting supply losses from the Strait of Hormuz were depleting global oil inventories "at a record pace"".

The vital waterway has become too dangerous to pass following the outbreak of war, while a number of refineries in the region have been either damaged or shuttered. The IEA said cumulative supply losses from Gulf producers now exceeded 1bn barrels, with more than 14m barrels per day (bpd) of oil now shut in, "an unprecedented supply shock".

Around 20% of global oil and gas supplies are normally transported through the Strait of Hormuz.

Benchmark oil prices, meanwhile, have seen "wild swings in response to conflicting signals on whether the US and Iran will soon reach a deal to end the conflict".

The IEA is now forecasting supply will be 1.78m bpd below total demand in 2026, wiping out its previous forecast, made last month, for a 410,000 bpd surplus

It concluded: "While demand may swing back to growth towards the end of the year if a deal to end the war is agreed that allows flows through the Strait of Hormuz to gradually resume from the third quarter, as is assumed in this report, supply will likely be slower to recover.

"As a result, the oil market remains in deficit until the final quarter of the year.

"With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period."

The IEA's 32 member countries, including the UK, agreed to release 400m barrels of oil from their strategic reserves in March to help calm markets. The IEA said around 164m barrels had so far been released.