IEA agrees release of 400m barrels of oil from strategic reserves

Proposed release is larger than the 182 million barrels of oil IEA ​members released after Russia invaded Ukraine in 2022.

The International Energy Agency (IEA) has agreed to release 400 million barrels of oil from its members’ strategic reserves, in an attempt to counter soaring global energy prices amid the United States-Israeli war on Iran.

The proposed release is larger than the 182 million barrels of ⁠oil that IEA member ⁠countries released in 2022 ⁠after Russia launched its ⁠full-scale invasion ⁠of Ukraine.

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“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size,” said IEA executive director Fatih Birol in a statement on Wednesday.

“Without sufficient routes to market and with no more available storage, Middle East oil producers have started to reduce production,” Birol said. “And we have seen further attacks and damage to energy and energy-related infrastructure. Refinery operations have also been disrupted, with major implications for jet fuel and diesel supplies in particular.”

IEA member countries hold more than 1.2 billion barrels of emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation.

Since the US and Israel launched their war on February 28, Iran has effectively closed the Strait of Hormuz, a crucial shipping route for oil produced by Gulf states, by threatening to attack shipping. About a fifth of global oil and gas supplies transit the waterway.

In response to the US and Israeli attacks, Iran has also targeted oil fields and refineries in Gulf Arab states, aiming at generating enough global economic pain to pressure the US and Israel to halt the war.

International bench mark Brent crude oil has surged more than 25 percent since the US and Israel launched the war.

Earlier this week, Brent was trading at $119 a barrel, the first time oil was trading at more than $100 a barrel since 2022 in the wake of Russia’s invasion of Ukraine.

After the IEA announcement, Brent was trading at more than $90 a barrel, with analysts saying that the record release was insufficient to ease fears of further supply disruptions after attacks on ships in the Strait of Hormuz.

The proposed release is roughly equal to about four days of global production and 16 days of the volume of crude that transits through the Gulf, Macquarie analysts estimated.

“If that doesn’t sound like much, it isn’t,” the analysts said in a note cited by the Reuters news agency.

Record release

Germany and Austria said earlier they would release parts of their oil reserves following an IEA request for members to release the record 400 million barrels to help temper energy price spikes due to the Iran war. Japan also said it will release some of its reserves starting Monday.

In a statement, the United Kingdom said it would contribute 13.5 million barrels of oil to the IEA release. South Korea also announced it would be contributing 22.46 million barrels of oil from its strategic reserves.

During an interview with Fox News, US Interior Secretary Doug Burgum welcomed reports of the planned release.

“This is the perfect time to think about releasing some of those to take some pressure off of the global price,” he said.

However, he said he did not believe that the world was facing an energy shortage as a result of the war.

“We’ve got a transit problem, which is temporary,” he said.

“You have a temporary transit problem that we’re resolving militarily and diplomatically, which we can resolve and will resolve,” he added.

While oil prices rebounded on Wednesday, analysts have said that the pace of daily IEA stock releases would be more important than the overall amount.

The announcement came a day after G7 energy ministers met Tuesday at IEA headquarters in Paris to look at ways to bring down prices. Birol said afterwards that they discussed all available options, including making IEA emergency oil stocks available to the market.

The IEA reserves were established in 1974, following the Arab oil embargo, to respond to global oil supplies.