NEW DELHI: The ongoing geopolitical tensions in the Middle East, which accounts for one-third of the world’s seaborne oil trade, have not impacted oil and LNG production so far but boosted freight and insurance costs, as per the International Energy Agency in its monthly report.
According to its oil market reports for January 2024, the risk of global oil supply disruptions from the Middle East conflict remains elevated, particularly for oil flows via the Red Sea and, crucially, the Suez Canal. The route, in 2023, accounts for 10% of the world’s seaborne oil trade, or about 7.2 mb/d of crude and oil products, and 8% of global LNG trade.
Moreover, the US and the UK airstrikes on Houthi targets in Yemen in response to attacks on tankers in the Red Sea by the Iran-backed group have raised concerns that an escalation of the conflict could further disrupt the flow of oil via key trade chokepoints. While oil and LNG production have not been impacted, a rising number of ship owners are diverting cargoes away from the Red Sea.
“Main alternative shipping route around Africa’s Cape of Good Hope extends voyages by up to two weeks, adding pressure on global supply chains and boosting freight and insurance costs,” said the report.
It also noted that Russia’s revenue from oil exports slumped to its six-month lowest despite an increase in oil shipments. It is attributed to an increase in oil price discount, while benchmark oil prices declined.
The market looks reasonably well supplied in 2024, with higher-than-expected non-OPEC+ production increases set to outpace oil demand growth by a healthy margin. As per the IEA, the global oil supply is forecast to rise by 1.5 mb/d (million barrels per day) to a new high of 103.5 mb/d in 2024.
The Americas, led by the United States, Brazil, Guyana, and Canada, will dominate gains in 2024, just as the region did last year. Meanwhile, the world oil supply is forecast to rise by 1.5 mb/d to a new high of 103.5 mb/d, fuelled by record-setting output from the US, Brazil, Guyana, and Canada.