Fatih Birol: Head of the International Energy Agency: “The oil market is under threat and the situation could get worse” | International

The oil market has been in a strange oil pond for weeks. Once the brutal blow of the Russian invasion of Ukraine had been overcome, all attention turned to a demand that radiated—and continues to radiate—clear signs of weakness. To everyone’s surprise, even the Middle East tinderbox did not affect prices. That all changed on Tuesday after Iran attacked Israel, the world’s seventh-largest producer and third-largest reserves, sending prices soaring and spreading a sense of uneasiness. “The situation in the oil market is risky, and it could become even riskier,” warns Fatih Birol, director general of the International Energy Agency (IEA), in a conversation with EL PAÍS.

Head of the energy division of the Organization for Economic Co-operation and Development (OECD). think tank rich countries) sees primarily two dangers on the near horizon. First, the war escalates and eventually involves other important producers in the key energy region. “This is the great unknown that I don’t know and I don’t think anyone knows: whether other countries will be directly affected in the coming days or weeks…” he slips into the phone. Five of the world’s 10 largest crude oil producers (Saudi Arabia, Iraq, Iran, United Arab Emirates and Kuwait) are located in the Middle East. And three (Iran, Qatar and Saudi Arabia) are also major gas powers.

The second risk is that the conflict “will end up affecting the strait, through which a significant amount of oil passes.” An obvious (though oblique) reference to Hormuz, the only possible link between the Persian Gulf and Oman, controlled by Tehran and through whose waters flows one in five barrels of crude oil moved every day in the world. With thousands of oil tankers flowing daily, the potential closure announced by Iran would be a major blow to prices.

“It is difficult to assess the impact that the closure of Hormuz will have, but it is clear that it will create a serious bottleneck. First of all, if it is total,” warns Birol (Ankara, 66 years old). An Israeli air attack on oil infrastructure in Iran seems a more likely and plausible option. “I don’t want to speculate on the consequences of an attack that we don’t know will happen or not…” the head of the Paris agency eludes. “But if this happens, we will see another increase in volatility.” For silver: if Hormuz closes, prices will rise vertically. The only question is how far.

Attenuants

In less than a week the trunk Brent, The reference price in Europe has risen from $70 to around $80. A significant rebound, although markedly smaller than that recorded in the spring and summer of 2022, when Russian President Vladimir Putin unleashed the biggest energy crisis in European history by invading Ukraine. Then the price of gas increased fivefold in the blink of an eye, and oil reached almost $130. Far, far from the current level. “At the moment, global demand is quite weak and will not peak until 2030. Thanks to this, prices do not rise further,” explains Birol.

In 2024, they estimate, consumption will rise by just one million barrels per day, held back by weak economic growth in Europe and China, as well as the growing electrification of transport. The growth projected by the IEA is markedly lower than predicted by most think tanks and the once all-powerful OPEC (Organization of the Petroleum Exporting Countries) cartel, a behemoth that has declined over the years. “We are in a relatively comfortable market situation, with more supply and less demand,” says Birol.

Muted rise

The radical change in market structure is also contributing to the taciturnity of recent price increases. “More and more oil is coming from the US, Canada, Brazil and Guyana: the fact that these countries are increasing their production is enough to cover the new demand.” Their figures also indicate idle (excess) capacity of about five million barrels per day in several OPEC countries, “especially Saudi Arabia and the United Arab Emirates.” A powerful safety cushion in case of possible interruptions in oil pumping from other Gulf countries.

Even in the worst-case scenario – the closure of Hormuz – through which much of the crude oil and gas from Saudi Arabia, Qatar and the Emirates is sent to Europe – Birol considers a cataclysm comparable to that caused by the Russian invasion of Ukraine unlikely. The Turkish economist, who is about to complete a decade at the head of the IEA, denies the most important thing: “I wouldn’t say so much: at that time Russia was the world’s leading oil exporter… I wouldn’t attach much importance to it on the same scale.” He also rules out the possibility of reaching $100 a barrel, at least in the short term: “Unless there is a major incident, I don’t think we will see these numbers… Unlike the past, this new geopolitical situation is emerging. when the market is not tight at all.” . Sag, which is damn “important” compared to 2022.