Oil could enter ‘red zone’ by July – IEA chief

The global oil market will enter a “red zone” by July-August 2026, the International Energy Agency (IEA) chief executive officer Fatih Birol has claimed in a recent interview.

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Speaking at Chatham House in London, Birol warned that shrinking global oil inventories and reduced exports from Middle Eastern producers amid the ongoing conflict could push oil markets into a precarious territory by July or August.

“This may be difficult and we may be entering the red zone in July-August if we don't see some improvements,” Birol said during the interview.

The Paris-based agency argued that today’s supply crunch is eclipsing past energy shocks – from the 1973 and 1979 oil crises to the fallout from Russia’s 2022 invasion of Ukraine – with an estimated 14 million b/d no longer reaching the global oil market.

At the same time, these supply concerns are emerging as fuel demand strengthens ahead of the peak travel season.

“Markets are still searching for signs of progress in a potential deal between the US and Iran,” two analysts from ING Bank noted. “While there are signs of optimism, uncertainty reigns,” they added.

The most important solution to the crisis remains a “full and unconditional reopening of the Strait of Hormuz,” Birol said.

However, market analysts caution that reopening the Strait does not necessarily mean a return to unrestricted oil flows – as Iran’s push to implement transit tolls is expected to face strong international resistance and could continue to limit movement through the chokepoint.

“Its [Hormuz toll] implementation would set a risky precedent for the free flow of vessels through key chokepoints globally,” ING Bank’s analysts added.

By Aparupa Mazumder

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