IEA: Sharp spike in Geopolitical Risk in the middle-East puts tightly balanced oil markets on edge following the attack by Hamas on Israel.
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Geopolitical Intelligence Network
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Tuesday, 24th October 2023
A sudden escalation in Geopolitical Risk in the Middle East, a region accounting for more than one-third of the world’s seaborne oil trade, has put oil markets on edge following the attack by Hamas on Israel.
What happens next remains highly uncertain. Our latest monthly Oil Market Report notes that the fast-developing conflict comes against a backdrop of tightly balanced oil markets, a situation the IEA has been warning about for many months. Oil prices had already surged to almost $98 a barrel in mid-September after Saudi Arabia and Russia extended their voluntary production cuts through year-end, and as inventories of crude oil and distillate fell to exceptionally low levels.
By early October, benchmark Brent futures tumbled by more than $12 a barrel. Supply fears gave way to deteriorating economic indicators and signs high prices were eating into demand in the United States, where gasoline deliveries plunged to two-decade lows.
The hit to demand was even more substantial in many emerging and developing economies, where the rise in fuel prices was amplified by the strengthening US dollar and removal of subsidies. However, demand growth has continued apace in China, India and Brazil, underpinning our forecast that global oil demand will rise by around 2.3 million barrels per day this year.
In line with its mission to uphold energy security, the IEA will continue to monitor oil markets closely. As ever, we stand ready to act if necessary to ensure markets remain adequately supplied. Find out more in the highlights and overview of this month’s report.