According to reports, the International Energy Agency (IEA) is planning to propose the release of the largest-ever strategic crude oil reserve, potentially surpassing the 182 million barrels released during the Russia-Ukraine conflict in 2022. Meanwhile, G7 leaders will hold an urgent teleconference on Wednesday to specifically discuss the Iran crisis and the surge in energy prices. This week, oil prices have experienced sharp fluctuations twice, and tonight could become the third major volatility trigger point, with the global energy market holding its breath.
The International Energy Agency (IEA) plans to propose the release of its largest-ever strategic crude oil reserve in history, aiming to stabilize international oil prices that have surged significantly due to conflicts involving the United States, Israel, and Iran.
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According to The Wall Street Journal, citing informed officials, the scale of this reserve release is expected to exceed the 182 million barrels released during the Russia-Ukraine conflict in 2022. IEA member countries are anticipated to make a decision on the proposal on Wednesday, which will pass unless opposed by any member country; however, any dissent from a single nation could delay the plan. Following the news of the IEA's proposal, international oil prices briefly declined, with WTI crude futures falling by 0.4%.
In a separate report by Reuters, Emmanuel Macron, President of France, which currently holds the G7 presidency, will convene a telephone meeting of G7 leaders on Wednesday to focus on the Iranian crisis and the sharp rise in energy prices. Previously, G7 energy ministers failed to reach an agreement on releasing strategic petroleum reserves during their meeting on Tuesday, instead requesting the IEA to assess the current situation before taking action.
Senior commodities journalist at Bloomberg, Javier Blas, revealed that this video conference is scheduled for 2:00 PM GMT (10:00 PM Beijing time on Wednesday), with discussions focusing on the "energy situation" and the Strait of Hormuz issue. He explicitly stated, "I doubt this will merely be a verbal intervention."
Oil prices have experienced two major fluctuations this week. On Monday, benchmark oil prices soared to nearly a four-year high; on Tuesday, U.S. President Trump predicted that the conflict in the Middle East might soon end, causing oil prices to plummet by 11%; later that evening, the U.S. Secretary of Energyissued an erroneous tweetclaiming that the U.S. Navy had successfully escorted an oil tanker through the Strait of Hormuz, causing oil prices to temporarily drop by 20%. If G7 leaders announce substantial measures after their meeting, tonight may trigger significant volatility in oil prices for the third consecutive trading day.
The IEA's extensive inventory provides room for intervention.
The IEA currently possesses ample reserve resources to address the current supply shortage. IEA Executive Director Fatih Birol stated on Monday that member countries currently hold 1.2 billion barrels of public reserves, in addition to 600 million barrels of mandatory commercial inventories. Rough calculations suggest that the total inventory amounts to approximately 124 days' worth of lost supplies from the Gulf region.
Although crude oil prices retreated below $84 on the same day, refined product prices such as diesel continued to climb. If the IEA's large-scale reserve release plan is implemented smoothly, it will directly inject liquidity into the market, alleviating the tight spot market conditions caused by physical supply disruptions.
G7 Energy Ministers Fail to Reach Consensus on Strategic Reserve Release
Prior to the leaders' call on Wednesday, G7 energy ministers held consultations on Tuesday regarding the situation but failed to reach an agreement on the release of strategic oil reserves. According to Reuters, the energy ministers instead requested that the International Energy Agency (IEA) assess the current situation before making a decision, effectively deferring the decision-making authority to the next phase.
This outcome has tempered market expectations for immediate policy responses, but it also underscores that meetings at the leadership level carry greater political pressure and decision-making weight compared to ministerial consultations. As a result, tonight's video conference is receiving significant attention.
Historical Effects of Strategic Reserve Releases
Historically, the actual impact of releasing strategic reserves on the market has been mixed. Following the outbreak of the Russia-Ukraine conflict in early 2022, IEA member countries released crude oil reserves twice in succession. Initially, this led to a 20% increase in oil prices, as traders viewed it as a signal that the oil crisis was more severe than expected. However, analysts noted that the reserve releases ultimately helped moderate oil prices.
One particularly successful intervention occurred during the Gulf War in 1991. At that time, then-U.S. President George H.W. Bush ordered the first-ever extraction from the Strategic Petroleum Reserve (SPR) on the night of the coalition forces' attack on Iraq, with IEA member countries also releasing reserves according to pre-planned coordination. On the first day of the U.S.-led offensive, oil prices plummeted by over 20%, effectively stabilizing the global energy market during wartime.
Hormuz Strait Crisis Disrupts Global Supply
The core reason for the IEA's proposal to release strategic reserves this time lies in addressing the massive supply disruption caused by the near-complete closure of the Hormuz Strait. The Hormuz Strait is a vital waterway connecting the Persian Gulf with global markets, through which approximately one-fifth of the world's daily oil supply passes. Due to Iran's threats against tankers, energy transportation via the strait has almost come to a standstill.
This risk of oil supply disruptions resulting from geopolitical conflicts in the Middle East was precisely the original rationale behind Western nations and their allies establishing the IEA after the 1974 Arab oil embargo. As a coordinating body, the IEA sets standards for crude oil reserves for its member countries and protects the global economy from the impact of oil market volatility through coordinated reserve releases.
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