Ongoing geopolitical tensions in the Middle East, responsible for one-third of the world’s seaborne oil trade, have not yet impacted oil and LNG production, according to the International Energy Agency (IEA) in its latest monthly report. While the conflict heightens risks, particularly for oil flows through the Red Sea and the Suez Canal, production levels remain stable.

The January 2024 oil market report from IEA underscores the elevated risk of global oil supply disruptions due to the Middle East conflict, specifically in the Red Sea and Suez Canal. These routes, accounting for 10% of seaborne oil trade and 8% of global LNG trade in 2023, have not seen a decrease in production, but concerns about potential disruptions persist.

Recent US and UK airstrikes on Houthi targets in Yemen, responding to Iran-backed group attacks on tankers in the Red Sea, have raised concerns about a possible escalation. Although oil and LNG production remains unaffected, a growing number of ship owners are redirecting cargoes away from the Red Sea, utilizing the longer alternative route around Africa’s Cape of Good Hope.

The report highlights that this alternative route extends voyages by up to two weeks, placing additional pressure on global supply chains and increasing freight and insurance costs. Meanwhile, Russia's revenue from oil exports has hit a six-month low despite increased oil shipments, attributed to an oil price discount amidst declining benchmark oil prices.

Looking ahead, the IEA's forecast for 2024 suggests a well-supplied market, with global oil supply expected to rise by 1.5 million barrels per day (mb/d) to reach a new high of 103.5 mb/d. The Americas, led by the United States, Brazil, Guyana, and Canada, are anticipated to dominate production gains, mirroring trends observed in the previous year. The report projects that increased non-OPEC+ production will outpace oil demand growth by a significant margin.