IEA's Birol does not expect energy markets to return to pre-war levels in 2027

SINGAPORE: The head of the International Energy Agency said on Monday that he does not expect energy markets in 2027 to return to where they were before the Iran war, which began in late February.

The conflict sharply tightened a market that had been projected to be in surplus this year, significantly disrupting global energy flows and pushing up oil benchmarks and refined product prices.

“I am afraid I don’t see any credible pathway that the markets will go next year, where we were before this war has started,” IEA Executive Director Fatih Birol told the Singapore International Energy Week conference.

“So therefore, we all need to get prepared, taking the energy security as a number one priority in our government, business world, but without forgetting what is the next chapter for the countries and for companies that are all here today,” he said.

More Houthi attacks in Saudi Arabia sent Brent crude futures as high as $117 a barrel on Friday, the highest level in nearly six months.

The contract eased on Monday but was still trading about 59% above its pre-war level. “Oil prices are flirting with $120 a barrel and the prices for products are even much higher,” Birol told a press conference.

He declined to give a forecast for oil prices, but added: “I can tell you that the current price of oil is, for some countries, for example in Europe, maybe not so high and affordable. But in many parts of the world, having almost $120 oil prices is having a major impact on trade deficits.”

Winter concerns

Birol also raised concern about winter demand for some fuels, especially diesel, which is used in parts of the West for heating.

“I am worried on top of that for refined products because we are entering…winter season. Some parts of the world, where typically diesel demand goes high and several refineries are going through maintenance period.”

“In Europe, we are facing a tough winter because European countries have decided to cut gas imports from Russia and with the additional problem now rising from the Iran war, namely Qatar and the Emirates not being able to export gas as they were before, will put significant pressure on gas markets.”

Birol expects a “strong comeback” for the nuclear sector as a result of the current crisis.

The IEA’s recent survey showed that 90 gigawatts of nuclear power plants are under construction and this is the highest in the last four decades, he added.