The largest scale in history! IEA announces the release of 400 million barrels of emergency oil reserves to the market

To address supply disruptions caused by the Iran war, the International Energy Agency (IEA) agreed on Wednesday to release 400 million barrels of oil from reserves, the largest coordinated release in the agency’s history.

Following the announcement, U.S. and Brent crude prices initially fell but quickly rebounded. Analysts believe that, given the near-closure of the Strait of Hormuz due to the Iran conflict, this measure will have limited impact on oil prices.

The IEA did not specify when these reserves will enter the market. The organization stated that its 32 member countries will gradually release stocks at appropriate times based on their individual circumstances.

The IEA is primarily composed of developed economies from Europe, North America, and Northeast Asia. Its responsibility is to maintain global energy security. Founded in 1974, the IEA was established in response to the 1973 Arab oil embargo during the Arab-Israeli war, which was triggered by Arab oil-producing countries’ support for Israel and U.S. backing.

IEA Executive Director Fatih Birol said, “The conflict in the Middle East is having a significant impact on global oil and natural gas markets, with far-reaching effects on energy security, affordability, and the global economy.”

Birol added, “I can now announce that IEA member countries have unanimously agreed to initiate the largest emergency oil reserve release in our history.”

This release aims to mitigate the short-term shocks caused by current supply disruptions. However, he emphasized that restoring stable global oil and gas supplies requires the resumption of tanker shipments through the Strait of Hormuz.

Before the IEA announced the release, energy analysts warned that even with the maximum release capacity, it might be difficult to fully offset the nearly 20 million barrels of daily oil transported through the Strait of Hormuz.

The Strait of Hormuz is a narrow maritime passage off the coast of Iran, connecting the Persian Gulf and the Oman Gulf. About 20% of the world’s oil and natural gas trade typically passes through this route.

Following joint U.S.-Israel strikes on Iran, energy officials hurriedly devised this reserve release plan. However, reports indicate that Iran has begun laying mines in the strait, suggesting that even if fighting stops, oil tanker transportation could remain disrupted for some time.

Since the outbreak of the Iran war on February 28, oil prices have been highly volatile. Brent crude, the global benchmark, surged close to $120 per barrel earlier this week but later fell below $90.

Earlier that day, Japanese Prime Minister Fumio Kishida announced that Japan plans to start releasing its national oil reserves as early as next week. He pointed out that Japan’s dependence on Middle Eastern energy is “unusually high.”

Kishida stated, “Before the IEA’s coordinated international reserve release decision is officially made, Japan has decided to take the lead and begin releasing its national oil stockpiles as early as the 16th of this month to ease supply and demand tensions in the international energy market.”

Currently, IEA member countries hold over 1.2 billion barrels of public emergency oil reserves, in addition to about 600 million barrels of industry reserves held by companies at the government’s request.

Previously, after the Russia-Ukraine conflict erupted in 2022, the IEA coordinated the release of approximately 182 million barrels of oil to stabilize the energy market.

Economists warn that continued rising oil prices will not only cause pain for consumers at the pump but could also trigger inflation and lead to stock market corrections.

Neil Atkinson, former head of the IEA’s oil department and now a visiting scholar at the Washington-based National Energy Analysis Center, said that since Monday, the impression that tankers might soon resume navigation has vanished. More ships have been attacked, and U.S. naval escort efforts seem to have been insufficient. “The consensus is very clear: this war will not end soon, and the damage to the global economy and its functioning could be significant.”