Oil Market Could Enter "Red Zone" This Summer Without Middle East Solution, Warns IEA

The oil market could enter a "red zone," with a supply shortage in "July or August," in the absence of a lasting solution to the Middle East conflict, the executive director of the International Energy Agency (IEA) warned on Thursday.

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The problem is that at the end of June, early July, the travel season begins and generally, oil demand, oil consumption increases.

"The problem is that at the end of June, early July, the travel season begins" and "generally, oil demand, oil consumption increases," explained Fatih Birol during an event organized by the think tank Chatham House. Faced with this situation, the IEA director stated that the organization is "ready to act" to release more oil reserves "if the countries decide to do so."

To calm the markets, the 32 member countries of the organization had announced in March the coordinated release of 426 million barrels, 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 about 14 million barrels per day.

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the organization is ready to act to release more oil reserves if the countries decide to do so.

In this situation, and despite the strategic reserves already released, the IEA had already sounded the alarm on May 13 about the "record" depletion of oil reserves as the Middle East war drags on. Without a rapid resolution of the conflict, crude oil prices could soar further. And above all, even if the Strait of Hormuz reopens, "it is unlikely that the price drop 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.

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it is unlikely that the price drop will be as significant as many hope.