The International Energy Agency (IEA) has proposed the largest ever release of crude oil from strategic reserves in its history, The Wall Street Journal reported on Tuesday, citing officials familiar with the matter. Energy officials from the IEA’s 32 member countries discussed the proposal at an emergency meeting amid the US-Israel war with Iran on Tuesday, the newspaper said.
Member countries will decide on the proposal on Wednesday. The plan will take effect if no country objects, but a protest from even one country could delay it, the report said.
Proposed release to ease crude prices
The IEA intends the release to cool global crude prices, which have surged amid the ongoing conflict involving the United States, Israel, and Iran. The fighting has raised fears of major supply disruptions in the Middle East.
Falling crude prices primarily benefit oil marketing companies, import-dependent nations, and sectors with high fuel usage, including airlines, paints, shipping, and tires. Lower prices reduce manufacturing, transportation, and logistics costs, which often boosts margins.
Officials told WSJ that the proposed release would exceed the 182 million barrels of oil released by IEA member countries in 2022 after Russia launched its full-scale invasion of Ukraine.
The IEA proposal aims to offset the massive disruption caused by the near-closure of the Strait of Hormuz, a narrow shipping lane linking the Persian Gulf to global markets.
About one-fifth of the world’s oil supply passes through the Strait every day, but fears of Iranian attacks on tankers have slowed shipments to a near halt, severely disrupting global oil flows.
US/Israel-Iran war impact on oil
Since 28 February, when the United States and Israel launched airstrikes on Iran, the global oil prices have surged as much as 40%, briefly crossing $100 per barrel before easing this week.
Traders are closely tracking US President Donald Trump’s statements on how long the war will last. Oil prices slipped below $84 on Tuesday, but fuel prices, such as diesel, continue to climb sharply.
Economists have warned that a sustained rise in oil prices could fuel inflation, trigger a stock market correction, and lead to higher fuel costs for drivers, according to the WSJ.
How many barrels does IEA hold?
IEA member countries collectively hold 1.2 billion barrels of oil in public stocks, along with another 600 million in mandatory commercial inventories, IEA Executive Director Fatih Birol said on Monday. By rough calculation, that is around 124 days’ worth of lost supply from the Gulf, WSJ said.
The members of the agency carried out two oil reserve releases in quick succession after the Russian invasion of Ukraine in early 2022. The move initially pushed oil prices up by about 20%, as traders interpreted the release as a sign that the oil crisis was more serious than they expected.
Analysts say the additional supply eventually helped bring prices down, according to WSJ.
(With agency inputs)
