The International Energy Agency warns: the oil mattress will run out in a few weeks

BarcelonaThe executive director of the International Energy Agency (IEA), Fatih Birol, warned this Monday that the cushion offered by commercial reserves accumulated before the war in the Middle East and the closure of the Strait of Hormuz will end in a matter of weeks. Reserves "are depleting very rapidly," Birol noted in statements to the press collected by Efe during the first day of the G7 Finance Ministers' meeting in Paris.

The price of a barrel of Brent crude oil, the benchmark in Europe, resumed its climb this Monday and at midday stood at $110.25, although it had surpassed $111 in the early hours.

Birol, when asked whether it was a matter of weeks or months, replied that "there are still several weeks left, but we must be aware that it is decreasing rapidly." In its latest monthly report on the oil market, published last week, the IEA noted that the closure of the Strait of Hormuz has deprived the market of more than 1 billion barrels from Persian Gulf countries, meaning that more than 14 million barrels per day have been held back and unable to leave.

And although Saudi Arabia and the United Arab Emirates are managing to export part of their production through other routes (basically oil pipelines that bypass the Strait of Hormuz) and other producing countries in other regions of the world have increased their crude pumping, between March and April global reserves have fallen by 250 million barrels, at a rate of 4 million barrels per day.

Birol recalled that before the war in the Middle East broke out, the market situation was one of oil surplus, about 2.5 million barrels per day above demand. But he pointed out that these margins "are not infinite, and commercial reserves are depleting rapidly." Furthermore, he warned that with summer in the northern hemisphere we are entering the travel season and a sowing season, when more fuel and also more fertilizers are consumed.

Risk of inflation

All these elements –commented the top leader of the IEA– contribute to press prices upward and this can have "significant repercussions on food prices and could significantly boost inflation". In March, the IEA countries collectively decided to release more than 400 million barrels of oil onto the market from their strategic reserves to calm market tensions and avoid speculative movements.

A measure of this kind could be repeated if the Strait of Hormuz remains closed, as stated today by the French Minister of Finance, Roland Lescure: "If it has to be done again in the coming months, we will do it", he assured upon arriving at the G7 meeting.

In its report last week, the IEA estimated that the crisis due to the closure of Hormuz and the price increase it is bringing will mean that global oil demand this year will decrease by 420,000 barrels per day, which contrasts with the increase of 1.3 million barrels per day in the forecasts it had made previously.

Repsol begins to produce in Alaska

Amidst this situation, the Spanish oil company Repsol, in consortium with the Australian company Santos, has begun producing oil in Pikka, in the North Slope area of Alaska (United States), with oil flow already established through the automated custody transfer system (LACT, for its English acronym) and has entered the oil sales pipeline, according to the company's statement.

Production will gradually increase until it reaches the planned level of 80,000 gross barrels of oil per day in the third quarter of the year. The first sales revenues are also expected in the third quarter, with partners alternating shipments of cargoes, the Spanish company explained. Repsol has a 49% stake in the project, while the Australian company Santos has the remaining 51% and acts as the operator.