Global oil markets are entering a more volatile phase, with fresh warnings from the International Energy Agency (IEA) that current prices do not yet reflect the full scale of supply disruptions, despite a slight dip in futures trading.
As at 11:05 AM (WAT), Brent crude traded at $96.09 per barrel, up 1.37 per cent, while WTI crude stood at $92.42 per barrel, gaining 1.25 per cent. The modest increases come even as market sentiment remains mixed over the trajectory of the Middle East conflict. The IEA, through its Executive Director Fatih Birol, cautioned that oil prices are likely to rise further as the disconnect between futures pricing and physical supply realities begins to close.
“Prices are already high, but they are not reflecting the severity of the problem,” Birol said.
“But I think soon we will see they will converge, which is an extremely sensitive issue for the global economy.”
At the centre of the disruption is the ongoing conflict in the Middle East, which has already wiped out as much as 13 million barrels per day of crude production. When refined products are included, total export losses are estimated at around 20 million barrels daily, tightening global supply significantly. The situation has been worsened by widespread infrastructure damage, with over 80 oil and gas facilities reportedly affected. Analysts warn that prolonged conflict could deepen output losses, with additional supply risks still emerging.
Despite these constraints, oil futures have shown occasional declines, driven largely by expectations of a ceasefire. However, this optimism contrasts sharply with conditions in the physical market, where supply shortages are already biting. Spot crude prices have surged dramatically, with immediate delivery cargoes in Europe and Africa reportedly nearing $150 per barrel. The spike reflects intense competition for available barrels as buyers scramble to secure supply following disruptions to Middle Eastern exports.
Refining activity is also beginning to slow. Analysts indicate that refineries in Europe and Asia are cutting processing runs due to limited crude availability, a development that could further tighten refined product supply in the coming weeks.
“Refineries in Europe and the US will also have to cut runs from next month to share the pain of the shortage,” an Energy Aspects analyst noted, highlighting the global ripple effect of the supply squeeze. In Asia, refiners have already started scaling back operations despite drawing from strategic reserves, signalling that the shortage is more severe than many traders initially anticipated. The IEA maintains that the current energy crisis could surpass previous oil shocks in scale, underscoring the speed at which market expectations can shift from surplus to acute shortage.
For oil-dependent economies like Nigeria, the outlook presents a mixed picture. Higher crude prices could boost government revenues, but sustained increases may translate into elevated fuel costs domestically, adding pressure to an already strained downstream market.