The International Energy Agency agrees to release 400 million barrels of oil from its reserves to contain rising prices
The conflict in the Middle East is forcing the international organization to draw on an unprecedented amount of reserves.
Madrid/ParisFaced with soaring oil prices and supply problems in some countries due to the war in the Middle East, the 32 member countries of the International Energy Agency (IEA) unanimously decided on Wednesday to release 400 million barrels of oil from their reserves, an unprecedented figure. This is the largest release in the agency's history and doubles the amount of barrels used from reserves for the war in Ukraine (182 million barrels were released at that time). Governments hope the measure will calm the markets and curb the rise in crude oil prices, which is already being felt at gas stations.
"The challenges we face in the oil market are unprecedented in their magnitude. That is why I am very pleased that the IEA member countries have responded with an unprecedented collective emergency action," the executive director stated in a public statement.
Without waiting for the IEA's formal decision, some governments, such as Japan's, one of the countries experiencing the most supply problems, and Germany's, had already announced this morning that they would draw on their strategic petroleum reserves. A meeting of the 32 countries had been held on Tuesday to discuss the measure, and none of them had objected.
More than 100 days
Spain, as a member of the IEA, will also release some of its reserves, as confirmed by the Minister for Ecological Transition, Sara Aagesen, this Wednesday morning during a breakfast briefing organized by Europa Press. Aagesen quantified the potential contribution of the Spanish state at approximately 12 days' worth of oil reserves (11.5 million barrels). She also stated that the state's current oil reserves cover demand for about 100 days. The war in Iran and its ramifications have almost completely blocked the Strait of Hormuz, through which a fifth of the world's oil and gas passes. This move by the IEA should therefore provide some relief for both oil prices and supply difficulties. However, the IEA's executive director cautioned that the priority is to reopen the strait to traffic. The release of barrels "is an important action aimed at mitigating the immediate effects of the tension on the markets. But, let's be clear, what's important for the recovery of stable oil and gas flows is the resumption of traffic through the Strait of Hormuz," Birol stated.
G7 Summit
The leaders of the G-7 countries—the group of the world's seven largest economies, comprising Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—met this afternoon via videoconference to discuss the economic consequences of the war in the Middle East and measures to mitigate them in a rotating G-7 meeting. The French head of state called for the restoration of maritime traffic in the Strait of Hormuz "as soon as possible" and asked US President Donald Trump to "clarify both his ultimate goals and the tempo which he wants to give to operations" in Iran. Macron also emphasized that, despite the problems in the oil market, there was "consensus" at the meeting on maintaining the current position regarding Russia. In other words, he argued that sanctions on Moscow's oil exports should not be lifted, an idea suggested by Trump.
The release of oil reserves will be "voluntary," Aagesen clarified, meaning countries could refuse to participate, although he doesn't believe any country will. "Spain will support the plan. We have always been supportive, and we understand that this way we will also help to reduce market tensions and allow other countries, where the tension extends beyond prices, to have a supply response," he said. According to IEA data, its members have emergency reserves of more than 1.2 billion barrels, plus an additional 600 million barrels reserved for industry. The coordinated release of reserves agreed upon this Wednesday is the sixth in the history of the organization, created in 1974. Previous collective actions occurred in 1991, 2005, 2011, and twice in 2022. The benchmark dollar in Europe, BK_SLT_LNA, has risen back above $90 this Wednesday morning. However, it is still far from the $118 it reached on Monday, although it remains above the $72 level it held before the attack on Iran.