Middle East tension unlikely to boost oil prices unless key producers enter conflict: IEA chief

Rising Middle East tensions are unlikely to significantly impact oil prices unless key producers are directly involved, according to the head of the International Energy Agency (IEA).

In an interview with Anadolu in Istanbul, Fatih Birol divulged that, rather than supply risks in the Middle East, market fundamentals are being driven by the OPEC+ oil cut policy.

"If one or more major oil-producing countries are not directly involved in the conflict, I do not think that prices will rise to very high levels," Birol said.

Earlier this month, the price of international benchmark Brent crude breached the threshold of $90 a barrel, reaching its highest level since October 2023 amid the heightened tensions between Israel and Iran.

Oil prices are currently hovering around $90 in global markets, which Birol said poses a serious risk for many countries worldwide by contributing to inflationary pressures, including Türkiye.

Nonetheless, he explained that the reason why oil prices are so high despite oil demand being relatively low compared to the last two years in 2022 and 2023 is due to the deliberate reduction of oil production by OPEC+ countries, a policy that the group is following to keep oil prices high.

Global demand has marginally increased by around 1 million barrels per day (bpd), and production is at an adequate level to meet this demand level, he said.

The latest edition of the agency's monthly oil market report for 2024 shows that global output is forecast to rise by 770,000 bpd to 102.9 million bpd.

Non-OPEC+ production will expand by 1.6 million bpd, while OPEC+ supply could fall by 820,000 bpd if voluntary cuts remain in place.

"Global oil demand growth is currently in the midst of a slowdown and is expected to ease to 1.2 million bpd this year and 1.1 million bpd in 2025, bringing a peak in consumption into view this decade," the report said.

While a tighter supply-demand balance is expected in the market, demand growth is predicted to be met by volumes from non-OPEC+ countries like the U.S., Brazil, Canada and Guyana.