IEA Director: The oil supply crisis will worsen in April, considering further release of strategic reserves

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Client Source: Cailian Press

Cailian Press, April 1 (Editor: Xia Junxiong) — On Wednesday (April 1), local time, International Energy Agency (IEA) Director Fatih Birol stated that since the outbreak of the Iran conflict, oil supply oversupply has caused a sharp rise in oil prices, and this situation will further intensify over the next month.

Birol was interviewed on the “In Good Company” podcast hosted by Norwegian Sovereign Wealth Fund head Nikolai Tangen on Wednesday. He pointed out that the energy crisis triggered by the U.S.-Iran war is the most severe in history.

Birol said that April will be much worse than March, because some oil and gas tankers in March still passed through the Strait of Hormuz before the outbreak of war.

“These ships are still arriving at ports, still transporting oil, energy, and other supplies,” Birol said. “But by April, there will be none. Oil losses in April will be twice those of March. Additionally, there will be disruptions in supplies such as liquefied natural gas. I believe this will feed into inflation and weaken economic growth in many countries, especially emerging economies. In many nations, energy rationing could occur very soon.”

At the end of February, the U.S. and Israel launched military operations against Iran, after which Iran blocked the Strait of Hormuz, which carries about one-fifth of global oil transportation.

Since the outbreak of the Iran conflict, international oil prices have soared. As the global benchmark, Brent crude oil prices rose over 60% in March, marking the largest single-month increase since records began in the 1980s.

On Tuesday, U.S. President Trump stated that U.S. forces would withdraw from Iran “within two to three weeks.” Iranian President Ebrahim Raisi also said that Iran is willing to end the war, but only if its demands are met, especially guarantees against further aggression.

Birol pointed out that the supply shocks caused by the Iran conflict have exceeded the scale of previous energy crises, such as the two oil crises in the 1970s and the energy shock following the full-scale outbreak of the Russia-Ukraine conflict in 2022.

“Looking back at the crises of 1973 and 1979, both events led to a reduction of about 5 million barrels per day in global oil supply, which caused many countries worldwide to fall into recession,” he said. “Now, we are losing 12 million barrels per day — more than the total of these two crises.”

Birol also stated that the loss of natural gas supplies due to the conflict and the blockade of the Strait of Hormuz exceeds the level seen four years ago during Russia’s natural gas supply disruptions.

“The current crisis surpasses the sum of these three crises. Moreover, many key commodities — petrochemical products, fertilizers, sulfur — are critical to the global supply chain,” Birol said.

He added, “We are heading toward a major, unprecedented supply disruption.”

IEA Considers Further Release of Strategic Petroleum Reserves

Birol also said that as the Middle East conflict continues, the IEA is considering releasing strategic petroleum reserves again.

“We evaluate market conditions daily, even hourly, around the clock. If we believe it’s necessary, we may recommend (releasing more reserves),” he said. “The biggest current issues are shortages of aviation fuel and diesel, which have already appeared in Asia and will soon propagate to Europe in April or early May.”

Last month, IEA member countries announced the release of 400 million barrels of crude oil from emergency reserves to address market turmoil. This was the largest coordinated action in history, more than twice the amount released after the Russia-Ukraine war in 2022.

“When the time is right, I will advise governments to act,” Birol said in the podcast. But he also emphasized that further reserve releases cannot fundamentally solve the energy market problems.

Birol said, “This can only alleviate suffering, not cure the root cause. The real solution is to reopen the Strait of Hormuz. We are just buying some time, but this is not the final solution.”