The International Energy Agency (IEA) will release as many as 400 million barrels of oil from its reserves in an unprecedented move to counteract the Iran war’s impact on global energy prices.
“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,” IEA executive director Fatih Birol said in a statement. “Oil markets are global so the response to major disruptions needs to be global too.”
The move comes after nearly two weeks of gyrations on oil markets since the US and Israel began their campaign against Iran at the end of February. Since then the Strait of Hormuz – a key artery for transporting oil from the region – has effectively been closed.
About a quarter of seaborne oil passed through the Strait of Hormuz last year, the IEA said, and there are only “limited options” to get oil out of the region through alternative routes, the agency noted. Export volumes of crude and refined products through the region are currently at less than 10 per cent of pre-conflict levels. Saudi Arabia, Kuwait and the United Arab Emirates have all reportedly cut oil production this week given their inability to ship the commodity to market.
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The price of Brent Crude, the European benchmark, has jumped more than a fifth since the day before the war began, while West Texas Intermediate (WTI) – the US equivalent – has risen at a similar rate. Brent soared to close to $120 earlier this week before falling back to the low $90 range, while WTI has registered similar moves.
The increase in prices, and volatility more generally, has already put huge pressure on households with governments and central bankers around the world assessing the impact of high energy prices on petrol and home heating fuel prices as well as inflation more generally.
“I welcome this decision as it will help restore confidence; this action is intended to increase supply and underpin the market in the weeks ahead,” Tánaiste and Minister for Finance Simon Harris said. “It will also help provide confidence and reduce market volatility.”
While the IEA did not specify its timeline for releasing its stockpile into the market, it “will be made available to the market over a timeframe that is appropriate to the national circumstances of each member country,” it said.
Earlier, Japan said it will start releasing its reserves as soon as next week.
“Rather than wait for formal IEA approval of a coordinated international reserve release, Japan will act first to ease global energy market supply and demand, releasing reserves as early as the 16th of this month,” prime minister Sanae Takaichi said. The country plans to make available about 15 days of private sector reserves and a month’s worth of State reserves. That is thought to total about 80 million barrels.
This is the sixth time the IEA has tapped its reserves during a crisis. It first did so during the 1991 Gulf War and did it twice as recently as 2022 after Russia’s invasion of Ukraine.
