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IEA oil report: geopolitical risks to

keep markets on edge
Save to read listPublished by Isabel Stagg, Editorial Assistant
World Pipelines, Monday, 16 October 2023 15:46

The International Energy Agency's (IEA) recent oil report says that “a sharp
escalation in geopolitical risk in the Middle East has markets on edge”.
In its October 2023 issue of the oil report, the IEA said the Israel-Hamas conflict since 7
October has “not had any direct impact on oil flows” currently, although it “spurred
traders to price in a US$3 – US$4 per bbl of crude oil risk premium” when the markets
opened, stabilising prices since.
Oil prices surged to almost US$98 per bbl in mid-September following voluntary
production cuts by Saudi Arabia and Russia. The IEA highlights the prospect of ‘higher for
longer’ interest rates due to fluctuating prices, slowing down economic and demand
growth for crude oil.
“Voluntary cuts are expected to keep the oil market in deficit as OPEC+ could pump 1.3
million bpd below the call on its crude in 4Q23,” the IEA said. Russian oil export revenues
rose from US$1.8 billion (Rbs174.41 billion) to US$18.8 billion in September 2023, the
highest since July 2022.
The rising Brent crude oil prices by early October, combined with supply fears,
deteriorated macroeconomic indicators and showed “signs of demand destruction” in the
US. The IEA data showed that US gasoline consumption fell to a two-decade low.
The demand growth in China, India and Brazil saw an increase of 2.3 million bpd to 101.9
million bpd in 2023, and the predicted growth is expected to slow down to 900 000 bpd
in 2024.
In September, Nigeria and Kazakhstan were the leaders in oil production as world oil
output rose 270 000 bpd to 101.6 million bpd. The report also said the overall OPEC+
output is set to decline in 2023, as global output driven by non-OPEC+ will increase by
1.5 million bpd and 1.7 million bpd in 2023 and 2024, respectively.
“The Middle East conflict is fraught with uncertainty, and events are fast developing,” said
the report. With tightly balanced oil markets, the IEA anticipates the international
community will remain “focused on risks to the region’s oil flows”.