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The International Energy Agency has warned of a growing risk to energy supplies following the escalation of the war in the Middle East, with the renewed shutdown of the Strait of Hormuz once again severely restricting shipments from the Gulf.
The intergovernmental agency said in a rare statement on Tuesday that while the crude market was benefiting from some “cushioning factors”, such as the continuation of an emergency oil stock release by member governments, it was “closely monitoring the situation” in markets.
“The escalation in hostilities affecting the Strait of Hormuz and energy infrastructure in the region increases security of supply concerns and uncertainty over the market outlook,” said IEA executive director Fatih Birol.
“There is no room for complacency on oil security amid the escalation in hostilities and a continued drawdown of available commercial inventories,” he added.
The statement will fuel speculation that the IEA is examining potential options if the strait does not open quickly, including further stock releases by members.
The IEA described the shutdown of the strait as the biggest supply disruption in history earlier in the war, and helped co-ordinate the largest release of emergency government oil stocks in history in March.
Birol said about 290mn barrels of the planned 400mn barrel emergency release had been drawn down so far, but said IEA members still held “in reserve” over “1bn barrels of government-controlled stocks”.
Oil prices fell sharply after a preliminary ceasefire in mid-June, with Brent crude dropping to around $70 a barrel — down from a high above $126 a barrel early in the war. But prices have since rebounded to about $90 a barrel, as traffic again slows to a trickle in the strait, with Iran striking a number of tankers in recent days.
The renewed closure of the waterway comes as oil and natural gas inventories have already been diminished, and the IEA said only an “unconditional” reopening of the passageway from the Gulf could stop “a further deterioration in global energy security”.
The US resumed air strikes against Iran two weeks ago and there has been an escalation in tit-for-tat attacks between the sides over control of the narrow waterway at the mouth of the Gulf through which a fifth of the world’s oil usually passes.
As attacks on energy assets in the Gulf and shipping have intensified in recent days, Yemen’s Houthi rebels have said they will impose a “maritime embargo” against Saudi Arabia’s ports, threatening an important lifeline for crude exports from the kingdom when the strait is impassable.
Saudi Aramco has exported nearly 5mn barrels a day through the Saudi port of Yanbu on the Red Sea during the Iran war, according to data from Kpler, the energy data company. Before the war the kingdom exported about 7mn b/d of crude.
“Threats to the Bab al-Mandeb Strait [at the mouth of the Red Sea], which has become increasingly important as a route to bypass the Strait of Hormuz, exacerbate these concerns further,” said Birol.
He also highlighted that petrol and diesel markets were much tighter than crude oil, and that Europe had struggled to refill natural gas storage sites ahead of winter due to a drop in Middle Eastern supplies.
The price premium for diesel over crude oil from refineries in north-west Europe hit a record high in recent days, reaching more than $80 a barrel and meaning diesel is changing hands for about $170 a barrel.
