Iran conflict causing ‘largest supply disruption’ in oil market history

THE global oil market is facing its biggest disruption to supply in its history, the International Energy Agency said in its latest report.

The conflict in the Middle East has brought the flow of oil and product to almost a standstill out of the Middle East Gulf, with global oil supply expected to decrease by 8m barrels per day in March, according to the IEA.

This is partly offset by higher output from non-Opec+ producers, the agency said, especially Kazakhstan and Russia.

But the agency estimates that nearly 20m barrels per day of crude and product exports are being disrupted as a result of the disruption, with limited alternative options to bypass the critical Strait of Hormuz.

That being said, alternative port loadings increased by almost 80% in the week of March 2 to March 8 compared to the week before. Saudi Arabia’s Yanbu has benefited the most, accounting for 43% of so-called alternative port loadings, while Fujairah and Muscat have also seen increased loadings.

D’Amico International Shipping CEO Carlos di Mottola told Lloyd’s List he expected refineries on Saudi Arabia’s west coast to maximise production using diverted barrels from the east.

With so few tankers choosing to transit the strait and domestic storage filling up, producers in the region are choosing to slow or even halt production. Most notably, Iraq has halted operations at its terminals following attacks at Basrah and on two vessels at the port earlier this week.

The IEA estimates that crude production is being curtailed by as much as 8m bpd, with big supply reductions evident in Qatar, Kuwait, the UAE and Saudi Arabia, alongside Iraq.

Refineries are feeling the heat too. Without tonnage available to load on to, more than 4m bpd of refining capacity is at risk, the agency estimates.

Despite wild fluctuations, oil prices remain elevated since the conflict began. Combined with what the IEA called “a deteriorating economic outlook”, there are fears that global product demand in particular will suffer.

The agency has cut its forecast of global oil demand growth in April and May by more than 1m bpd, and its estimate for 2026 as a whole by 210,000 bpd.