By Giulia Petroni
The International Energy Agency slashed its forecast for oil supply growth a day after a historic emergency stock release, as the Middle East war chokes flows through one of the world's most critical oil-transit routes.
The Paris-based organization, a group of Western nations and their allies, now expects supply to grow by 1.1 million barrels a day this year--a dramatic cut from the 2.4 million barrels a day expected previously. All supply growth is expected to come from outside the OPEC+ alliance as the conflict forces major Gulf producers to curb output.
In March, supply is projected to plunge by 8 million barrels a day to 98.8 million barrels a day, the lowest levels since the first quarter of 2022.
"The war in the Middle East is creating the largest supply disruption in the history of the global oil market," the IEA said in its closely watched monthly report on Thursday.
The Strait of Hormuz--a vital route handling roughly one-fifth of the world's oil flows--remains effectively closed, with Iran targeting cargo ships and striking key energy infrastructure in the region. Major producers, including Kuwait and Iraq, have started cutting output, while Saudi Arabia is rerouting flows to alternative channels.
The IEA on Wednesday said its member countries would release 400 million barrels of oil from their emergency stocks--the largest reserves release in history--in an effort to bring down prices.
Oil markets have been on a wild ride in recent days, with volatility spiking Monday as crude prices nearly reached $120 a barrel before retreating. In midmorning European trading on Thursday, Brent crude was around $97 a barrel after soaring back above $100 a barrel earlier, while West Texas Intermediate hovered around $87 a barrel.
Market watchers, however, cautioned that the IEA's move is likely to offer only temporary relief. Even the agency acknowledged the limits, saying the stock release provides a "significant and welcome buffer" but remains "a stop-gap measure" without a swift resolution to the conflict.
"Resuming oil flows through the Strait of Hormuz will be key in minimizing the impact from the war," it said, adding that insurance and physical protection measures for shipping will be essential.
The IEA said Gulf countries have cut at least 10 million barrels a day of oil production. Producers in the region are expected to shut in around 7.9 million barrels a day of crude this month, with the full extent of losses depending on how long the conflict lasts and the scale of disruptions through the Strait of Hormuz.
Upstream production will take weeks, and in some cases even months, to return to pre-crisis levels, depending on the degree of field complexity and the availability of workers, equipment and resources in the region. The conflict is also severely disrupting global product markets, with jet fuel, LPG and ethane among the most immediately affected products.
Still, global supply losses were slightly tempered by the return of North American production after the winter freeze and Kazakh supply following a series of disruptions earlier this year.
On the demand side, widespread flight cancellations and large-scale disruptions to LPG supplies are expected to curb oil demand by around 1 million barrels a day in March and April compared to previous estimates. "This puts an end to the strong start to the year evident in reported January and February deliveries," the IEA said.
The IEA now expects global oil demand to rise by 640,000 barrels a day this year, down from an earlier forecast of 850,000 and compared with 770,000 barrels a day in 2025.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
03-12-26 0607ET
