The Group of Seven (G7) sent an important signal just hours before a key summit, expressing its principled support for utilizing strategic oil reserves to address energy market volatility triggered by the Iran conflict.
According to Bloomberg, in an email statement released on Wednesday, G7 energy ministers stated they would work closely with the International Energy Agency (IEA) to monitor energy market trends and coordinate within the G7 as well as with international partners, IEA member countries, and other nations.
The G7 energy ministers added that they were, in principle, supportive of "taking proactive measures to address this situation, including the use of strategic reserves."
Notably, French President Emmanuel Macron, the current G7 rotating chair, will convene a virtual summit of G7 leaders at 22:00 Beijing time on Wednesday to focus on the Iranian crisis and the sharp rise in energy prices.
The key topics of discussion during this virtual meeting are the "energy situation" and the issue of the Strait of Hormuz. It was explicitly noted that "I doubt this will merely be a verbal intervention." If the G7 leaders announce substantial measures after the meeting, tonight could become the trigger point for significant fluctuations in oil prices for the third consecutive trading day.
Energy Ministers' Meeting: Principled Support but No Final Decision Yet
The G7 energy ministers held a video conference with the International Energy Agency (IEA) on Tuesday to discuss the impact of the Iran conflict on energy markets and supply. In a joint statement issued on Wednesday following the meeting, the energy ministers said they were closely monitoring energy market dynamics in cooperation with the IEA and enhancing coordination within the G7 as well as with international partners and IEA member countries.
The statement also expressed "warm welcome" for the meeting of the IEA Governing Board held on the same day, describing it as a "crucial opportunity" for member states to assess current supply security and market conditions.
However, according to Reuters, the energy ministers at Tuesday's meeting did not reach an agreement on releasing strategic oil reserves but instead requested the IEA to first assess the current situation before taking any action. The phrase "principled support" in the statement indicates that specific action plans still require final approval at the leadership-level summit.
Oil prices have experienced severe fluctuations this week, and the market remains highly sensitive.
This week, oil prices have experienced two rounds of significant fluctuations, with the market being highly sensitive to any policy signals. On Monday, benchmark oil prices surged to a near four-year high; on Tuesday, Trump predicted that the conflict in the Middle East might end soon, causing oil prices to plummet by 11%; on Tuesday evening, a tweet from the U.S. Secretary of Energy, which was regarded as a mistake, claimed that the U.S. Navy had successfully escorted an oil tanker through the Strait of Hormuz, leading to a further drop of 20% in oil prices.
Against this backdrop, the outcome of the G7 leaders' summit is drawing significant market attention. If substantial measures for releasing reserves are announced after the meeting, it will exert direct downward pressure on oil prices; if the response remains at verbal statements, the market reaction may be relatively limited.
Editor/joryn
