IEA: Oil Production sees record drop in March

Paris, Apr 14 (EFE).- Oil production plunged by 10.1 million barrels per day (mb/d) in March due to the war in the Middle East, the largest drop in history, the International Energy Agency (IEA) said on Tuesday, warning that market losses would be greater in April.

In its monthly oil market report released on Tuesday, the IEA noted that in March, production losses from the conflict that erupted on Feb. 28 with the US and Israeli bombing of Iran cumulatively accounted for more than 360 million barrels (mb), but that the figure would increase to 440 mb in April.

At the beginning of April, Iran’s almost total blockade of the Strait of Hormuz meant that 3.8 mb/d of crude oil, natural gas and refined products were passing through there, when in February before the hostilities began it was more than 20 mb/d.

And although some countries such as Saudi Arabia, the United Arab Emirates and Iraq have enabled other ways to export a portion of their hydrocarbons outside the Strait of Hormuz, losses in oil exports exceed 13 mb/d and would have to be partly offset by resorting to reserves, which are declining.

The IEA has also has sharply revised down its demand forecasts for this year and now estimates that it will average 104.259 million barrels per day (mb/d), which is 730,000 barrels per day (b/d) less than it had calculated in March, during the first few days of the war.

Between the second and fourth quarters, the fall in consumption will be 1.5 mb/d, the «sharpest» decline since the outbreak of the Covid-19 crisis in 2020.

That would be the scenario if the situation from May onwards were to normalize and the market progressively resupplied with oil from the Persian Gulf; but if the disruptions were prolonged, the fall in demand could reach 5 mb/d year-on-year between the second and fourth quarters.

The report’s authors warn that in that second scenario, in which production and export disruptions of Middle Eastern oil remained high, reserves would have to continue to be used at unsustainable rates of 6 mb/d (2,000 mb for the year as a whole).

That would mean that a further cut in demand would have to be deliberately forced in order to balance the market.

IEA Executive Director Fatih Birol warned on Monday in Washington that April would be worse than March for the energy sector even if a way out of the war was achieved, because although last month the market could be supplied with the oil tankers that had been loaded in the Persian Gulf before the conflict broke out, that could not happen now.

Birol described it as the worst energy crisis in history, not only affecting oil and natural gas, but also other essential commodities, such as fertilizers, petrochemicals and helium.

The report’s authors of the report insisted that the blockade of the Strait of Hormuz was «the single most important variable in easing the pressure on energy supplies, prices and the global economy,» and that although the announcement of a ceasefire last week provided a respite to global oil markets, it remained to be seen whether this would translate into ships returning to normal traffic through that waterway.

That tension due to uncertainty has translated into physical crude oil prices, those effectively paid for a shipment, reaching record levels close to $150 a barrel, which are increasingly disconnected from the price on the futures market, for example, Brent crude. EFE

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