A risk of shortage: the oil market could shift into "zone rouge" this summer, no outcome in the war in the Middle East

The oil market could enter a “red zone”, with a shortage of supply in “July or August”, in the absence of a lasting solution to the conflict in the Middle East, warned this Thursday, May 21, the executive director of the International Energy Agency Fatih Birol.

“The problem is that at the end of June, beginning of July, the travel season starts” and “in general, the demand for oil, the consumption of oil increases,” he explained during a speech at an event organized by the think tank Chatham House.

Faced with this situation, the director of the IEA affirmed that the organization stood “ready to act” to release more oil reserves “if countries decide.”

Release of 426 million barrels

To calm the markets, the 32 member countries of the organization announced in March the coordinated release of 426 million barrels, or more than a third of their strategic stocks, an unprecedented decision. However, according to the IEA, the paralysis of traffic in the Strait of Hormuz linked to the war in the Middle East has already caused the loss of more than a billion barrels of exports from Gulf producers, a loss for the market of around 14 million barrels per day.

In this situation, and despite the strategic reserves already released, the IEA had already sounded the alarm on May 13 on the “record” meltdown of oil reserves as the war in the Middle East gets bogged down.

Without a rapid resolution to the conflict, black gold prices could soar further. And above all, even if the Strait of Hormuz reopens, “it is unlikely that the drop in prices will be as significant as many hope,” says Arne Lohmann Rasmussen, analyst at Global Risk Management, citing the need to replenish global stocks and the logistical problems to be resolved.