①The International Energy Agency (IEA) agreed on Wednesday to release 400 million barrels of oil reserves to address supply disruptions caused by the Iran conflict, marking the largest coordinated release action in the agency's history; ②Analysts stated that the measure would have a limited impact on oil prices in the event that the Iran conflict nearly shuts down shipping through the Strait of Hormuz.
Cailian Press, March 11 (edited by Niu Zhanlin) To address supply disruptions triggered by the Iran conflict, the International Energy Agency (IEA) agreed on Wednesday to release 400 million barrels of oil reserves, marking the largest coordinated release action in the agency’s history.
Following this announcement, West Texas Intermediate (WTI) and Brent crude oil prices briefly declined but quickly rebounded. Analysts believe that the measure will have a limited impact on oil prices if the Strait is almost completely closed to shipping due to the Iran conflict.
The IEA did not provide a specific timeline for when these reserves will enter the market. The agency stated that its 32 member countries would gradually release inventories within an appropriate timeframe based on their respective national conditions.
The IEA members are primarily composed of developed economies in Europe, North America, and Northeast Asia, and the organization's mandate is to safeguard global energy security. The IEA was established in 1974 against the backdrop of the 1973 Arab-Israeli War, during which Arab oil-producing countries imposed an oil embargo due to U.S. support for Israel.
Fatih Birol, Executive Director of the IEA, stated in his speech: 'The Middle East conflict is having a significant impact on global oil and gas markets, with far-reaching implications for energy security, energy affordability, and the global economy.'
Birol pointed out: 'I can now announce that IEA member countries have unanimously decided to initiate the largest emergency oil reserve release action in the history of the organization.'
The head of the IEA stated that this release aims to alleviate the short-term impact of the current supply disruption. However, he also emphasized that restoring stable supplies in the global oil and gas markets requires the resumption of tanker traffic through the Strait of Hormuz.
Prior to the IEA’s announcement of the reserve release, energy analysts had warned that even if the IEA utilized its maximum release capacity, it might struggle to fully offset the nearly 20 million barrels of oil typically transported daily through the Strait of Hormuz.
The Strait of Hormuz is a narrow maritime passage located off the coast of Iran, connecting the Persian Gulf and the Gulf of Oman. Approximately 20% of global oil and gas trade volumes typically pass through this waterway.
Energy officials hastily devised this plan to release reserves following the U.S.-Israel joint strike on Iran. However, reports indicate that Iran has begun laying mines in the Strait, suggesting that even if hostilities cease, tanker traffic may remain disrupted for some time.
Since the outbreak of the Iran war on February 28, oil prices have fluctuated dramatically. Brent crude, the global benchmark, surged close to $120 per barrel earlier this week before retreating below $90 per barrel.
Earlier in the day, Japanese Prime Minister Sanae Takagi stated that Japan plans to begin releasing its national oil reserves as early as next week. She highlighted that Japan's dependence on Middle Eastern energy is 'exceptionally high.'
Takagi announced, 'While awaiting the formal decision by the IEA to coordinate the release of international reserves, Japan has decided to take the lead and will begin releasing its national oil stockpiles as early as the 16th of this month to alleviate supply-demand tensions in the international energy market.'
IEA member countries currently hold over 1.2 billion barrels of public emergency oil reserves, in addition to approximately 600 million barrels of industry reserves mandated by governments for companies to maintain.
Previously, following the outbreak of the Russia-Ukraine conflict in 2022, the IEA coordinated the release of approximately 182 million barrels of oil reserves to stabilize energy markets.
Economists warn that persistently rising oil prices will not only impose fueling costs on motorists but could also trigger inflation and spark a stock market correction.
Neil Atkinson, former head of the IEA's Oil Industry and Markets Division and now a visiting scholar at the Center for National Energy Analysis in Washington, noted that what has changed since Monday is that the impression tankers might soon resume passage has vanished. More vessels have been attacked, while U.S. naval escorts appear not to have been implemented. 'The consensus is clear: this war will not end soon, and the damage to the global economy and its functioning could be significant.'
Editor/Stephen
