IEA proposes largest-ever release of oil from strategic reserves to curb crude oil prices

(Patria) - The International Energy Agency (IEA) proposes the largest-ever release of oil from strategic reserves in history to curb crude oil prices that have sharply risen due to the US and Israel's war against Iran. This measure would surpass the release of 182 million barrels of oil, which IEA member states put on the market in two instances in 2022 following Russia's full-scale invasion of Ukraine, writes The Guardian.

The proposal, according to The Wall Street Journal, citing unnamed officials, was presented at an emergency meeting on Tuesday, where energy officials from 32 IEA member states gathered. They met to decide whether to activate their emergency stockpiles. Member countries are expected to make a decision on supporting the plan on Wednesday, but it could be delayed if even one member opposes it.

The IEA maintains strategic oil reserves as part of an emergency system designed to help countries overcome oil price crises. Members of the agency, founded after the Middle East oil crisis of the 1970s, are obliged to hold crude oil reserves sufficient for at least 90 days of consumption, and these can be released onto the market in the event of supply disruptions.

In total, IEA members have over 1.2 billion barrels of public emergency oil reserves and an additional 600 million barrels of reserves held by the industry under government obligation. Global oil and liquefied gas supplies have been hampered for more than seven days due to the de facto blockade of the Strait of Hormuz, a key maritime route off Iran through which approximately one-fifth of the world's oil and gas traffic passes.

The price of Brent crude oil has fluctuated significantly in recent days, briefly reaching $119.50 per barrel on Monday, a level not seen since 2022. On Wednesday morning, it was announced that the G7 group of leading world economies generally supports the use of strategic oil reserves to respond to supply shortages and market instability.

Energy ministers from seven countries held a video conference on Tuesday with the head of the IEA to discuss the possible release of emergency oil stockpiles to stabilize the situation, after prices recorded historic growth in recent days.

Despite the announcement, oil prices continued to rise. A barrel of Brent crude oil, which serves as an international benchmark, increased from around $87.5 to over $91. Such an increase suggests that markets are not entirely convinced that this measure will be sufficient to mitigate potential supply disruptions.

"In cooperation with the IEA, we are closely monitoring developments in the energy market and coordinating actions within the G7 and with our international partners, IEA members, and beyond," reads a statement from the G7 energy ministers. The G7 ministers added that they generally support "taking proactive measures to resolve the situation, including the use of strategic reserves."