Crude hits $111 as IEA warns of prolonged crisis

Brent crude oil price rose above $111 per barrel on Tuesday, as the International Energy Agency warned that global energy markets might not return to normal in 2027 amid escalating tensions in the Middle East.

The international benchmark was trading above $111 per barrel, according to CNN, as concerns over a possible escalation of the conflict involving the United States and Iran heightened fears of further disruptions to global oil supplies.

However, Oilprice.com data showed that Brent later retreated to $109 during the day.

The Executive Director of the IEA, Fatih Birol, warned that the global energy market remained vulnerable to overlapping crises in the Middle East, saying there was no credible prospect of a return to normal next year.

“I don’t see any credible pathway that 2027 will be a year of normalisation,” CNN quoted Birol as saying at an industry gathering in London on Tuesday.

He warned that the Strait of Hormuz, a strategic waterway that handled about one-fifth of global oil and natural gas supplies before the war, could be closed again.

“The Strait of Hormuz has been closed once, it can be closed again,” he said.

The warning comes as crude oil price rose in recent weeks amid concerns that the conflict involving the United States and Iran could escalate, threatening oil production and shipments across the region.

Iran has signalled preparations for another round of conflict, issuing public threats against Washington, while Saudi Arabia has faced attacks by Iran-backed Houthi militants that have disrupted oil shipments.

The developments have heightened uncertainty in the international energy market, although oil continues to flow from the Middle East despite the security challenges.

• Iran denies Saudi accusation of involvement in Houthi attacks
• Iraq loses $60bn as Mideast war hits oil exports
• War drains 2bn barrels of Middle East oil output — Kpler

Data from analytics firm, Kpler, showed that the seven-day average of oil flows from the region, including shipments through the Strait of Hormuz, the Red Sea and the Gulf of Oman, had risen above pre-war levels to just over 24 million barrels per day as of Tuesday.

CNN reported that the restoration of Saudi Arabia’s pipeline exports had helped sustain oil flows, even as tanker crossings through the Strait of Hormuz remained well below pre-war levels.

Birol warned against assessing the severity of the energy crisis solely through crude oil prices, noting that petroleum products had experienced more significant price increases.

“We don’t use crude oil, we use products,” he said, noting that diesel prices had doubled from pre-war levels, largely because of the conflict involving Iran and attacks on Russian refineries.

He warned that the outlook could worsen as diesel demand typically increases during the coming season, while several major refineries are scheduled for maintenance.

“We are on thin ice and I am very worried about this,” he stated.

The IEA chief added that member countries would consider releasing additional emergency oil reserves if necessary to ease supply pressures.

The agency’s member countries agreed to release 400 million barrels from emergency reserves in March, with about 80 per cent of the volume already supplied to the market and the remaining 20 per cent yet to be released.

Birol said member countries still held about 1.6 billion barrels in reserves.