The global oil market will break out of its roughly $80-$100 range by the first quarter of 2027 at the latest, boosting inflation and reducing energy demand, if the Middle East conflict continues, Claudio Descalzi, the CEO of Italian state-controlled group Eni said. The release of stockpiles has helped to keep crude prices largely within that range so far, he said in an interview with Il Sole 24 Ore newspaper published on Saturday. Oil prices ended the week with solid gains despite easing from their midweek peaks following renewed US-Iran hostilities and attacks on shipping in the Strait of Hormuz. Brent crude climbed above $75 a barrel before falling to the $70 averages, close to its pre-war trading. Descalzi said the strategy carries growing risks because global reserves are finite. “The long-term solution is greater energy security through diversification of supply sources and routes,” he said. In March, the International Energy Agency (IEA) said its member countries have agreed to release 400 million barrels of oil in an attempt to bring down oil prices as the Iran crisis and the consequent disruption of shipments through the Strait of Hormuz inflicted massive shocks to energy markets. The IEA’s maximum drawdown capability aims to decrease the safety margin in oil markets, increasing the likelihood of sharp, structural price fluctuations if any new supply disruptions emerge. Every $5 increase in oil prices adds roughly $190 billion in annual costs to the global economy, according to Reuters calculations based on oil demand of 104 million barrels per day. At current Brent prices, it would likely cost more than $70 billion to replace reserves drawn down to mitigate Iran war supply loss. Descalzi said global oil stocks have fallen by an average 3.8 million barrels per day, accelerating to 4.6 million bpd in May, as a result of disruption linked to the Iran war that began at the end of February. He said countries should focus on producers in North and sub-Saharan Africa, Latin America and Southeast Asia, while reducing dependence on controlled maritime passages. Eni has limited exposure to the Middle East, while most of its upstream production is in Africa and Latin America. Power demand generated by artificial intelligence technologies and the rapid expansion of data centers has increased the urgency of ensuring security of energy supply.
