IEA monthly report signals oil market uncertainty following attack on Israel

The global oil market was rattled over last weekend’s attack on Israel by Hamas terrorists. According to the International Energy Agency’s (IEA) flagship monthly Oil Market Report released Thursday, the conflict won’t directly impact the physical supply of petroleum.

However, the report stated, as the crisis unfolds, markets are watching the conflict closely.

”The Middle East conflict is fraught with uncertainty and events are fast developing. Against a backdrop of tightly balanced oil markets anticipated by the IEA for some time, the international community will remain laser focused on risks to the region’s oil flows,” the IEA said.

Palestine and Israel aren’t major oil producers, but the conflict could spread to major producers in the Middle East, including Iran. Iranian officials have denied any involvement in the Hamas attacks.

Oil demand, according to the report, will grow by 2.3 million barrels per day in 2023, an increase of 100,000 barrels per day from the agency’s September report.

That would bring total global demand to 101.9 million barrels per day, setting a new record. Growing demand in China is a key driver of the increase.

Oil output, according to the IEA, will reach record highs in 2023 and 2024, driven by nations that aren’t members of OPEC+, which is expected to see declines this year.

Preliminary September data shows that U.S. gasoline consumption fell to two-decade lows.

Oil prices initially jumped roughly $3 per barrel following the attacks on Israel.Brent crude prices had fallen to around $85 per barrel Thursday morning, and West Texas Intermediate were around $83 per barrel.

Pioneer Natural Resources CEO Scott Sheffield warned on CNBC’s Squawk Box Wednesday that prices will spike if Iran becomes directly involved in the conflict.

Whether or not that happens, Sheffield said, depends on how much evidence Israel Prime Minister Benjamin Netanyahu has that Iran was involved in the attacks and how he responds to it.

Sheffield appeared on Squawk Box to discuss Pioneer’s merger with ExxonMobil. ExxonMobil CEO Darren Woods, who was interviewed on the show with Sheffield, said the company can produce oil at $35 barrel, and with Saudi Arabia cutting production, he expects Brent prices to go into the $80 to $100 range next year.

Though, he acknowledged the projection comes with a lot of uncertainty.
“If a tough game to predict where prices are going to go,” Woods said.