IEA: "Energy markets will not return to pre-war conditions by 2027"

Fatih Birol, Executive Director of the International Energy Agency (IEA), does not expect energy markets to return to the state they were in before the war in Iran began in late February, Reuters reports, citing Agerpres.

The conflict in Iran has placed severe strain on an energy market that was projected to see a surplus this year; it has significantly disrupted global energy flows, driving up benchmark oil prices and the costs of refined petroleum products.

"Unfortunately, I do not see any credible path for markets to return to the situation that existed before this war began," the IEA chief stated yesterday. He added: "Consequently, we must all be prepared and make energy security our number one priority-both at the government level and within the business sector-without, however, losing sight of the next chapter for the countries and companies represented here today."

• Brent crude oil prices reach a six-month high

Fresh attacks by Houthi rebels from Yemen on Saudi Arabia pushed Brent crude futures to $117 per barrel on Friday-the highest level in six months. While the price dipped slightly yesterday, it remains approximately 59% higher than it was before the war. "Oil prices are hovering near the $120-per-barrel mark, while the prices of refined products are even significantly higher," Birol stated during a press conference.

Although he declined to provide a forecast for oil prices, the IEA official added: "I can say that for some countries-for instance, in Europe-the current price of oil may not be that high and remains affordable. However, in many other parts of the world, a price of nearly $120 per barrel has a major impact on trade deficits."

Birol also expressed concern regarding the demand for certain types of fuel during the winter-particularly diesel, which is used for heating in some Western regions. "I am also concerned about the situation regarding refined products as we enter the winter season," Birol said, adding: "In certain parts of the world, demand for diesel typically rises during this period, even as several refineries undergo maintenance. In Europe, we are facing a difficult winter, as countries on the continent have decided to reduce gas imports from Russia. Furthermore, an additional issue has emerged-stemming from the conflict involving Iran-whereby Qatar and the United Arab Emirates are no longer able to export gas at previous levels; this will place significant pressure on gas markets." The IEA Director has forecast a "strong comeback" for the nuclear sector in the wake of the current crisis, noting that a recent study by the Agency shows that nuclear power plants with a capacity of 90 gigawatts are currently under construction worldwide-the highest level in the last four decades.

• Russia's oil exports via the Arctic route have surged

Russia's oil exports via the Arctic route have already exceeded last year's levels by nearly 50%, with approximately 20 million barrels transported to Asia between the start of the shipping season in July and mid-October, according to traders cited by Reuters.

Moscow anticipates that this Arctic shipping route-which begins in Murmansk, near the Russian-Norwegian border, and ends at the Bering Strait-will become increasingly accessible to large vessels as climate change reduces ice cover, facilitating the delivery of goods to Europe and Asia.

Traders noted that the Arctic route has become more attractive this year, given the disruptions affecting routes through the Suez Canal, the Strait of Hormuz, and the Black Sea region.

Tanker charter rates have reached record highs, as conflicts in the Middle East and Ukraine have fueled inflation and made American crude oil prohibitively expensive for Asian refineries, which are now seeking alternatives from the Middle East and Latin America. Consequently, the high costs associated with using the Arctic route-which requires icebreaker assistance-have become more competitive when compared to the standard route to Asia via the Red Sea, traders explained. For Russia, which controls the Arctic route, this represents a secure alternative to European waters, where tankers carrying Russian crude oil have been repeatedly detained this year.

According to preliminary estimates by traders, the volume of Russian oil exported via the Arctic route is expected to increase by another 5-10 million barrels by the end of the shipping season. In the previous season, Russia transported 13 million barrels along this route.

Gazprom Neft, one of Russia's oil giants, will increase its shipments via the Arctic route by approximately 35% this year compared to 2025, the company's CEO, Alexander Dyukov, recently stated.

Russia is also shipping significant quantities of liquefied natural gas (LNG), as well as other commodities, to Asia via the Arctic route. Shipments of liquefied gas along this route are also expected to rise this year, following the commencement of LNG transport from the Arctic region.

In September, at an economic forum held in Vladivostok, President Vladimir Putin stated that Russia expects the volume of cargo transported via the Arctic route to double, reaching 70 million tonnes annually by the end of the decade. Rosneft's new oil project in northern Russia, Vostok Oil-launched last month-is already contributing to an increase in the volumes transported via the Arctic route.

Although the route presents numerous challenges, it allows for a reduction in travel time between Europe and Asia. Typically, a ship requires one week to travel from Novaya Zemlya, in western Russia, to the Bering Strait in the east. From there, it takes another 12-14 days for the vessel to reach ports in Shanghai and elsewhere in northern China. By comparison, a ship needs a month and a half to travel from the Baltic Sea to Shanghai via the Suez Canal, and up to 50 days to travel from the port of Murmansk to Shanghai via the Suez Canal.