The Middle Eastern producers may need up to two years to restore their oil and gas output to the levels from before the war, according to Fatih Birol, the executive director of the International Energy Agency (IEA).
“We estimate that it would take about two years for the Gulf region to reach pre-war levels again,” Birol told Swiss newspaper Neue Zürcher Zeitung in an interview published on Friday.
The timeline for the return of supply will vary from one country to another, Birol said, adding that Iraq would need much more time to restore output to pre-war levels compared to Saudi Arabia, for example.
The IEA estimated in its monthly report this week that global oil supply plunged by 10.1 million barrels per day (bpd) to 97 million bpd in March, due to attacks on energy infrastructure in the Middle East and ongoing restrictions to tanker movements through the Strait of Hormuz, leading to the largest disruption in history.
OPEC+ production slumped by 9.4 million bpd in March compared to February, while non-OPEC+ supply declined by 770,000 bpd, as lower Qatari output offset gains in Brazil and the United States.
The market is currently underestimating the prospect of a prolonged closure of the Strait of Hormuz, Birol said in the interview with Neue Zürcher Zeitung.
The last shipments that had left the Strait before the war have now arrived at their destinations, mitigating the supply crunch to an extent, the head of the IEA said. Yet, there weren’t any loadings and no new shipments of oil and gas to Asia in March.
“This gap is now becoming apparent. If the Strait of Hormuz is not reopened, we must prepare for significantly higher energy prices,” Birol said.
Last month, the IEA coordinated the biggest release in its history, of 400 million barrels, and could resort to another emergency release from stocks if the situation doesn’t improve soon, the executive added.
“We are not there yet, but it is definitely under consideration,” Birol told Neue Zürcher Zeitung.
By Tsvetana Paraskova for Oilprice.com
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