IEA warns: Oil prices in Europe could rise, global crisis extended until 2027

Oil markets will remain tight until 2027 and wholesale oil prices in Europe could rise again in the coming weeks, the International Energy Agency (IEA) warned on Wednesday.

In its monthly report, the Paris-based energy watchdog said the recovery in Gulf oil supplies had failed to solve the fuel problem, with global production still falling short of consumption.

Supply rose by 2.5 million barrels per day to 102.3 mb/d in September, driven by a surge in Gulf crude exports, led by Saudi Arabia, to more than three-quarters of pre-war levels, but remains slightly below global demand of around 103.5 mb/d, the IEA estimated.

The war that began with US-Israeli attacks on Iran on February 28 is far from over. Iran has blocked the Strait of Hormuz, the route for about a fifth of the world's oil, and has recently stepped up attacks on shipping there, while Yemen's Iran-backed Houthi rebels are striking Saudi oil fields. "Repeated attacks in the Persian Gulf leave the recovery fragile," the IEA said.

On Tuesday, the British maritime safety agency UKMTO said shells of unknown origin had hit a tanker and a container ship in the strait.

Early Wednesday, Iran's elite Revolutionary Guard said a container ship carrying more than 2,500 containers sank south of the strait after striking a naval mine and burst into flames, claiming it followed an unauthorized route and warning others of the ongoing dangers.

Brent crude, the international benchmark for oil prices, rose about 1%, reaching above $107 a barrel in early trading on Wednesday, but later pared gains and is hovering around $106 at the time of writing.

Meanwhile, the benchmark US gasoline, West Texas Intermediate, traded unchanged at around $94.75 per barrel.

Oil prices have pulled back from September records above $200 a barrel, but benchmarks "remain almost double the price of crude oil and their pre-crisis levels," the IEA said.

With Middle Eastern fuel exports below half their pre-war levels and Russian refineries hit by Ukrainian drones, oil supplies remain under pressure.

Rising transportation costs could add to this pressure.

"As tensions in the crude oil shipping market spread to other tanker categories, prices for oil shipped to dominant gasoline import markets – Europe, Africa and Latin America – could rise again in the coming weeks," the IEA said.

The IEA said the lost oil reserves are unlikely to be replenished beyond normal seasonal variations before the second half of 2027.

The G7 pledged on October 2 to release up to 100 million barrels of emergency reserves through the IEA, initially oil.