'Sky is the limit' for oil prices: former IEA exec

Core Viewpoint - The current oil market is experiencing unprecedented volatility, with prices nearing $120 per barrel, influenced by geopolitical tensions and production cuts from major oil-producing countries [1][2][3]. Supply and Production - Iraq is reportedly shutting in significant production, approximately three million barrels per day, while Kuwait may also consider production cuts [2]. - Saudi Arabia may need to reduce its wellhead production in the coming weeks due to limited storage capacity, which could exacerbate the current supply crisis if geopolitical tensions persist [3]. Historical Context and Comparisons - The current situation is compared to past oil supply disruptions, such as the Iranian Revolution in 1979 and the Gulf War in 1990, which led to significant price increases and economic recessions [5][6]. - Previous shocks have shown that while oil prices can soar, they also lead to demand destruction, which is a concern for OPEC [6][10]. Demand Dynamics - There is an expectation of demand destruction as oil prices rise, impacting consumer behavior and discretionary oil use, particularly in leisure driving and the aviation industry [8][9]. - Even before the current conflict, the outlook for oil demand growth in 2026 was modest, with estimates around one million barrels per day [9]. - Persistently high oil prices are likely to lead to revised assessments of global oil demand growth, as consumers will seek to reduce usage in response to increased costs [10].