The International Energy Agency (IEA) provides for a significant oversupply of oil on international markets, provided that the Middle East peace agreement is maintained next year. According to the organisation's monthly report, the restoration of production after the US and Israel conflict with Iran is expected to lead to a significant increase in supply, exerting further price pressure.
In its monthly oil market report, the International Energy Agency first examines the effects of the post-war period, as the United States and Iran prepare to sign on Friday a provisional peace agreement extending for 60 days the ceasefire's validity.
Agency analysts estimate that the restart of oil installations that remained inactive for months would allow the gradual restoration of oil flows from the Persian Gulf within 2026.
Global production is expected to increase by about 8 million barrels a day, reaching 110 million barrels in 2027. On the contrary, global demand is projected to be strengthened at a much slower rate, by just 2 million barrels a day.
According to the IEA, this development will create a ‘significant surplus’ on the market, which may offer relief to consumers and enable countries to make up for reduced stocks or create new strategic oil reserves.
The Agency notes that crude oil stocks in OECD countries have declined to the lowest level since 1990.
Oil prices have already recorded a significant drop since the announcement of the agreement between Washington and Tehran last weekend. Brent, the international reference point, was negotiating Wednesday near $78.5 per barrel, versus about $87 at the end of last week and $126 at the end of April, when the conflict was at its peak.
Accordingly, the American slow West Texas Intermediate (WTI) was moving just over $75 a barrel, from levels that had approached $120 during the crisis.
An important role in increasing the supply is expected to play countries such as the United Arab Emirates, which left OPEC during the crisis and plan to increase their production. At the same time, Saudi Arabia has stated that it can restore its production to pre-war levels within just three weeks.
At the same time, the US, Brazil and Venezuela have also increased production in recent months, responding to the needs created by the war conflict.
Although the complete restoration of the market has not yet begun, investors and traders have moved on to mass sales of oil contracts following the announcement of the interim agreement Sunday. As a result, Brent retreated below $79 a barrel, at the lowest level since the early days of the war.
The International Energy Agency also notes that the downward trend had begun since May. It is typical that from then to mid-June, North Sea oil prices declined more than $40 per barrel, touching 82 dollars, as markets discounted the possibility of a peace agreement.
The drop also contributed to the significant decrease in oil markets from China and Japan, which limited their demand for a total of around 6 million barrels a day.