IEA Warns of Period of Increased Volatility in Energy Markets
IEA head Fatih Birol stated that the market has entered a period of high turbulence due to supply disruptions, and the agency is ready to tap additional strategic reserves to stabilize prices.
Red alert: why Birol's statement is not a warning but a call to mobilization
The gist: what is really happening
Fatih Birol's statement at the economic summit in Toronto is not a routine warning. It is a diplomatically coded signal to the market that the era of "strategic reserves as a last resort" is over, and the era of manual management of the global oil balance has begun. The International Energy Agency, created in 1974 precisely for such moments, has effectively admitted that the usual stabilization mechanisms no longer work, and the world is entering a zone of turbulence where every decision will be made in real time.
The key point that most observers missed: Birol was not so much talking about market volatility as about a structural transition. His phrase that "even after the conflict ends, supply will recover slowly" means that the IEA no longer counts on a quick return of Iranian oil to global circulation. This is a tectonic shift in assessments, contradicting optimistic statements by diplomats about an imminent peaceful settlement.
Timeline and context
Birol's speech on May 7 did not take place in a random location. Canada is the world's fourth-largest oil producer, but its export infrastructure is geared toward the US, covering only 2-3% of Europe's and Asia's needs. The IEA head's visit to Ottawa and his meeting with Prime Minister Mark Carney is not a polite protocol but an operational mission to diversify export flows. Birol effectively called on Canada to become an alternative supplier for countries that have lost access to Persian Gulf oil.
The context of this call: the blockade of the Strait of Hormuz has been ongoing for over two months. According to Energy Intelligence, the world has lost access to supplies of about 15 million barrels per day from the region. The IEA has already conducted an unprecedented release of 20% of strategic reserves—but that was only enough to smooth price shocks, not compensate for the physical deficit.
The situation is exacerbated by the fact that not only the transport artery has been damaged. According to Birol, a significant portion of energy infrastructure in the region has suffered serious or critical damage. This includes oil fields, refineries, and pipelines in more than nine countries. Even if peace breaks out tomorrow, recovery will take weeks—during which the market will continue to burn.
Who wins and who loses
Canada—an unexpected beneficiary. Birol's visit effectively turned Canada into a "lifeline" for the global energy system. A country long perceived as a regional supplier with limited export potential is now positioned as an "obvious choice" for nations seeking reliable energy partners. Canadian oil assets—from Alberta's oil sands to offshore projects—will see an influx of investment estimated at $5-7 billion over the next two quarters. Prime Minister Mark Carney, former head of the Bank of England, understands market conditions better than most politicians.
Asian economies in the critical zone. Japan, South Korea, and India, critically dependent on Middle Eastern oil, find themselves in a near-panic situation. With Brent at $106 per barrel, their import bills are swelling by $180-220 million per day above normal. Tokyo has already initiated emergency consultations with the IEA on additional reserve releases—Japan's strategic stockpiles are being drawn down at a rate of 800,000 barrels per day.
OPEC countries outside the conflict zone are winners. Saudi Arabia and the UAE, despite their own infrastructure being at risk, are recording record export revenues—each additional dollar per barrel brings them a combined $15 million per day. However, this gain is tactical: a prolonged conflict undermines the long-term attractiveness of Middle Eastern oil, accelerating the energy transition and supply diversification by consumers.
The International Energy Agency—institutionally strengthened. Paradoxically, the crisis returns the IEA to a role that had eluded it during the energy transition era. The agency is once again becoming the main coordinator of the global response to an oil shock—a role it last performed at full scale in 2022.
What the media is not saying
Insight one: "volatility" is a euphemism for physical shortage of petroleum products.
Birol used the diplomatic term "volatility," but the real problem is harsher. It is not about price fluctuations but about approaching a point where gasoline, diesel, and jet fuel will physically run out in certain regions. The IEA's strategic reserves are crude oil, not refined products. To turn it into gasoline, you need refineries, and their global utilization is already near capacity. The world is facing a bottleneck not in production but in refining—and Birol omitted this, focusing on reserves.
Insight two: 20% of reserves is much more than it seems.
At first glance, "20% of available reserves have been used" sounds like "80% remain." But a strategic reserve is not a bank account. A significant portion of the remaining volumes is the operational minimum needed to run pipelines and export terminals. In fact, the IEA has already spent about a third of the volumes truly available for emergency release. The next withdrawal will mean approaching the "red line"—the point where reserves cease to fulfill their function.
Insight three: Birol's meeting with Carney is a link in the chain of creating an alternative supply system.
The talks in Ottawa were not just about export diversification. Sources close to the Canadian government report a plan to accelerate the expansion of the Trans Mountain pipeline's capacity by 150,000-200,000 barrels per day within 60 days. This would require temporary relaxation of environmental regulations—a step the Canadian government is extremely reluctant to take, but the crisis leaves no choice. If the plan is implemented, Canada could redirect up to 500,000 barrels per day to Asian markets via the port of Vancouver.
Insight four: tactical silence on China.
Birol did not say a word about China's role—and it is critical. Beijing, the world's largest oil importer, is drawing down strategic stockpiles at a rate of 1.4 million barrels per day. But unlike IEA members, China is not required to disclose the volume and structure of its reserves. This lack of transparency creates additional uncertainty in the market. No one knows how much oil Beijing has left in storage—but if Chinese spot market purchases suddenly increase, it will be a signal that reserves are near depletion.
Forecast: the next 30 days and 90 days
Next 30 days (until June 9):
The IEA will announce a new round of reserve releases totaling 180-200 million barrels—the largest in history. This decision will be made at an emergency meeting of the agency's governing board on May 12-14. Canada will announce a temporary relaxation of environmental regulations to accelerate exports. Brent will hold in the $100-115 range—higher than the IEA would like, but below the panic level of $130. Key risk: incidents in the Strait of Hormuz could trigger short-term spikes to $125-130.
Refineries in Europe and Asia will begin cutting production due to physical feedstock shortages—even despite reserve releases. This will manifest in gasoline and diesel price increases outpacing crude oil price growth.
90-day horizon (until August 9):
Critical period. If the Strait of Hormuz remains blocked, the strategic reserve mechanism will start to falter. The IEA will face a choice: either continue withdrawals, risking reaching the "red line" of operational minimum by September, or admit that reserves have exhausted their stabilizing function.
In any scenario—even if the strait opens—recovery will be slow. Damaged infrastructure will require weeks for repairs; the tanker fleet will need time to redeploy. The summer driving season in the Northern Hemisphere will take place under conditions of structural deficit, and gas station prices in the US and Europe will reach levels that directly impact consumer inflation and political ratings.
For investors, the key takeaway: the volatility Birol warned about is not a temporary phenomenon but a new normal. Hedging oil risks will become a mandatory element of corporate strategies in 2026, and energy security will finally transform from a technical issue into a matter of national strategy for dozens of importing countries.
— Editorial Team
