The International Energy Agency agreed Wednesday to release 400 million barrels of oil to address the supply disruption triggered by the war in Iran, the largest such action in the organization’s history.
The IEA has not set a timetable for when the shares will hit the market. It said the reserves would be released on a timetable tailored to the situation of each of its 32 member countries.
IEA members are primarily advanced economies from Europe, North America and Northeast Asia. The organization is responsible for maintaining global energy security. It was founded in 1974 in response to the oil embargo imposed by Arab producers due to American support for Israel during the 1973 Arab-Israeli War.
“The conflict in the Middle East is having significant impacts on global oil and gas markets, with major implications for energy security, energy affordability and the global oil economy,” IEA Executive Director Fatih Birol said in a speech broadcast from the group’s headquarters in Paris.
“I can now announce that IEA countries have unanimously decided to launch the largest ever emergency oil stock release in the history of our agency,” Birol said. AIE Members Currently They hold more than 1.2 billion barrels of public emergency oil stocks, and an additional 600 million barrels of industrial stocks are held under government obligation.
The IEA chief said the publication was aimed at responding to the immediate impacts of the supply disruption. But tanker traffic must resume in the Strait of Hormuz to bring stable flows of oil and gas back to the global market, Birol said.
The strait is a narrow maritime corridor off the coast of Iran that connects the Persian Gulf and the Gulf of Oman. About 20% of the world’s oil and gas usually passes through it. Tanker traffic across the strait is at a standstill as shippers fear attacks from Iran.
Earlier in the day, Japanese Prime Minister Sanae Takaichi said the country intended to release its oil stocks from its national reserves as early as next week, citing an “exceptionally high level of dependence” on the Middle East.
The biggest supply disruption ever seenThe closure of the strait triggered the largest oil supply disruption in history, according to analyzes by consultancies Rapidan Energy Group and Wood Mackenzie.
Energy analysts warned ahead of publication that even the IEA’s maximum curtailment capacity would likely not be able to offset the nearly 20 million barrels per day that typically passes through the strait.
The IEA chief painted a dire picture of the situation. Middle Eastern producers are reducing production and refinery operations are being disrupted, with major consequences for the supply of diesel and jet fuel in particular, Birol said. Attacks continue to damage energy and energy-related infrastructure, he said.
Read more news about the US-Iran warThe global supply of liquefied natural gas, or LNG, has been cut by 20%, forcing higher-income economies in Asia to compete with Europe for available cargoes, the IEA chief said. LNG is a form of natural gas that is cooled into liquid form so that it can be loaded onto tankers for export. Natural gas is used to produce electricity and heat homes around the world.
Oil prices have been extremely volatile since the outbreak of war in Iran on February 28, global benchmark Brent crude rising to nearly $120 per barrel at the start of the week, before falling back to around $90.