The International Energy Agency (IEA) has proposed the largest-ever release of 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 in an emergency meeting on Tuesday amid the US-Israeli war with Iran, the paper said.
Member countries will decide on the proposal on Wednesday. The plan will go into effect if no country objects, but a protest by even one country could delay it, the report said.
Proposed relaxation to reduce oil prices
The IEA intends to cool global oil prices, which have soared amid the ongoing conflict involving the United States, Israel and Iran. The fighting has raised fears of major supply disruptions in the Middle East.
Oil marketing companies, import-dependent countries and fuel-intensive industries including airlines, paints, shipping and tires benefit mainly from falling oil prices. Lower prices reduce production, shipping and logistics costs, which often increase margins.
Officials told the WSJ that the proposed release would exceed the 182 million barrels of oil released by IEA member countries in 2022 after Russia launched its large-scale invasion of Ukraine.
The IEA’s proposal aims to offset the massive disruption caused by the near-closure of the Strait of Hormuz, the narrow shipping lane connecting the Persian Gulf to global markets.
About a fifth of the world’s oil supplies pass through the strait every day, but fears of Iranian attacks on tankers have slowed supplies to a near halt, severely disrupting global oil flows.
The effect of the US-Israel-Iran war on oil
Since the United States and Israel launched airstrikes on Iran on February 28, global oil prices have risen as much as 40%, briefly topping $100 a barrel before falling this week.
Traders are closely watching US President Donald Trump’s statement on how long the war will last. Oil prices fell below $84 on Tuesday, but prices for fuels such as diesel continue to rise 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 the IEA hold?
IEA member countries collectively hold 1.2 billion barrels of oil in public stocks, along with another 600 million in mandatory commercial stocks, IEA Executive Director Fatih Birol said on Monday. Roughly calculated, this equates to 124 days of lost supplies from the Persian Gulf, the WSJ reported.
Agency members made two oil stockpile releases in quick succession following Russia’s invasion of Ukraine in early 2022. The move initially pushed oil prices up about 20% as traders interpreted the release as a sign that the oil crisis was more serious than expected.
Analysts say the additional supply ultimately helped lower prices, according to the WSJ.
(With agency inputs)
