In a special free-to-access abridged version of its Oil Market Report, the IEA predicts that the disruption to global energy stocks will have rivalled the impact of COVID-19, if it amounts to a decline of 1.5mn b/d in 2Q2026.

‘Initially, the deepest cuts in oil use have come in the Middle East and Asia-Pacific, mainly for naphtha, LPG and jet fuel. However, demand destruction will spread as scarcity and higher prices persist,’ said the IEA. It expects an overall oil contraction of 80,000 b/d of oil demand over the year as a whole.

In March, global oil supply fell by more than 10% to 97mn b/d. Global observed oil inventories fell by 85mn barrels that month. Floating oil stores within the Strait raised the Middle East total to 100mn barrels; onshore crude stocks rose 20mn barrels.

The IEA called the disruption ‘the most severe oil supply shock in history’, during which oil prices rose the largest ever in March. In mid-April, North Sea Dated crude was trading at more than double pre-conflict levels at $130/b.

According to the IEA, shipments through the Strait averaged around 3.8mn b/d in early April, compared to 20mn b/d beforehand, while pipeline exports from the west coast of Saudi Arabia and through Iraq and Turkey had increased to 7.2mn b/d.

It added: ‘The overall loss in oil exports exceeds 13mn b/d, with associated production curtailment and damage to energy infrastructure in the region resulting in cumulative supply losses of more than 360mn barrels in March and 440mn barrels projected for April.’

The IEA reports that oil inventories have been tapped to make up the shortfall. Where they are not available, operations are being reduced, with examples of cutbacks including Asian petrochemical producers and flight cancellations in the Middle East, Asia and Europe.

Some analysts view these changes as a key moment in energy trade, and not so temporary either. Javier Solis, Analyst at Wood Mackenzie – Maritime Team – said: ‘Europe’s diesel deficit and gasoline surplus, combined with Asia’s role as the balancing valve, represent a moving landscape in which pricing and flows remain tightly linked to political decisions rather than purely commercial signals.’

Wood Mackenzie reports that Europe, facing constraint in supply from the Middle East, has turned to long-haul North American crude and finished products. However, Europe is exporting surplus unleaded motor spirit and fuel oil to Asia and Africa.

In the meantime, European diesel prices remain high, because of heavy reliance on premium US imports. Diesel premiums are predicted to remain high for the rest of the year.

Asia has absorbed Europe’s excess gasoline and fuel oil alongside record volumes of North American crude.

International renewables agency IRENA contends that oil and gas supply disruptions show the risks inherent in fossil fuels.

‘The current crisis clearly demonstrates the strategic case for renewables as a national security imperative,’ commented IRENA Director-General Francesco La Camera.  

A new policy brief lays out national policies that can help in this regard. IRENA suggests nations: 

• Facilitate the deployment of distributed renewables.
• Use public information campaigns and mandates to reduce energy demand.
• Fast-track time-of-use tariff adoption to enable consumers to shift their electricity consumption to times where renewable supply on grids is high and prices are low.
• Implement fiscal measures such as grants, subsidies or tax rebates in support of electrification.
• Accelerate solar PV–battery hybrid mini-grids in off-grid and weak-grid remote areas.
• Accelerate two/three-wheeler electrification in emerging economies, incentivise electrification of public transport through financial and fiscal support, and encourage car-pooling where appropriate.