IEA: Global oil market may enter 'red zone' in July-August

International Energy Agency (IEA) Executive Director Fatih Birol said on Friday that the global oil market could enter a "red zone" in July-August as summer fuel demand peaks, Middle East supply remains tight, and inventories continue to fall.

Birol issued the warning in a speech at the Chatham House think tank in London, highlighting concerns over oil supply disruptions stemming from the conflict involving Iran.

"If we do not see an improvement in the situation, we may enter the red zone in July or August," he said.

He noted that over 14 million barrels per day of oil supply from the Middle East have been disrupted due to attacks on energy infrastructure and Iran's effective blockade of the Strait of Hormuz, creating the largest oil supply crisis in history.

Birol did not provide a precise definition for the "red zone," but indicated that the pre-war surplus in the oil market, combined with the 400 million barrels of strategic oil reserves coordinated for release by the IEA, and the depletion of commercial inventories, were insufficient to resolve the current crisis.

"The most important and only solution is the full and unconditional opening of the Strait of Hormuz," he stressed.

Birol stated that the IEA, which has 32 member countries, has coordinated the largest-ever release of strategic oil reserves, with 2.5 to 3 million barrels per day entering the market.

Reuters estimates that if the initial 400 million barrels of reserves are released at this rate, they will all enter the market by early August, coinciding with Birol's warning of the "red zone."

He added that the IEA is prepared to coordinate further releases of strategic oil reserves if necessary.

Birol indicated that it would take a considerable amount of time for Middle Eastern oil production and refining capacity to return to pre-war levels, with varying recovery speeds among countries.

He admitted, "I am most concerned about Iraq," stating that the country's finances have been severely impacted by reduced oil revenues. Furthermore, insufficient storage capacity has forced Iraq to shut down some oil fields, and restarting these fields is typically complex.

Birol pointed out that countries like Saudi Arabia and the United Arab Emirates, with their financial resources and advanced technology, might recover more smoothly.