The International Energy Agency (IEA) has proposed its largest ever release of oil reserves to counter soaring crude prices driven by the US-Israeli war with Iran, the Wall Street Journal reported Tuesday, citing officials familiar with the matter.
The International Energy Agency (IEA) has proposed its largest ever release of oil reserves to counter soaring crude prices driven by the US-Israeli war with Iran, the Wall Street Journal reported Tuesday, citing officials familiar with the matter.
The release would exceed the 182 million barrels IEA member countries put on the market in 2022 following Russia's invasion of Ukraine, the paper said.
The proposal was circulated at an emergency meeting of energy officials from the IEA's 32 member countries on Tuesday, with a decision expected Wednesday, according to the Journal. The IEA proposal aims to offset the massive disruption caused by the near-closure of the Strait of Hormuz, a narrow shipping lane linking the Persian Gulf to global markets.
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About one-fifth of the world’s oil supply passes through the Strait every day, but fears of Iranian attacks on tankers have slowed shipments to a near halt, severely disrupting global oil flows.
Proposed release to ease crude prices
The IEA intends the release to cool global crude prices. The conflict involving the United States, Israel, and Iran has raised fears of major supply disruptions in the Middle East.
Falling crude prices primarily benefit oil marketing companies, import-dependent nations, and sectors with high fuel usage, including airlines, paints, shipping, and tyres. Lower prices reduce manufacturing, transportation, and logistics costs, which often boosts margins
US/Israel-Iran war impact on oil
Since February 28, when the United States and Israel launched airstrikes on Iran, the global oil prices have surged as much as 40%, briefly crossing $100 per barrel before easing this week.
Traders are closely tracking US President Donald Trump's statements on how long the war will last. Oil prices slipped below $84 on Tuesday, but fuel prices, such as diesel, continue to climb sharply.
Economists have warned that a sustained rise in oil prices could fuel inflation, trigger a stock market correction, and lead to higher fuel costs for drivers, according to the WSJ.
How many barrels does IEA hold?
IEA member countries collectively hold 1.2 billion barrels of oil in public stocks, along with another 600 million in mandatory commercial inventories, IEA Executive Director Fatih Birol said on Monday. By rough calculation, that is around 124 days' worth of lost supply from the Gulf, WSJ said.
The members of the agency carried out two oil reserve releases in quick succession after the Russian invasion of Ukraine in early 2022. The move initially pushed oil prices up by about 20%, as traders interpreted the release as a sign that the oil crisis was more serious than they expected.
Analysts say the additional supply eventually helped bring prices down, according to WSJ.
(With inputs from AFP)
