Oil prices climbed sharply on Wednesday even after the International Energy Agency announced the largest coordinated release of strategic oil reserves in its history, underscoring the scale of supply concerns stemming from escalating tensions in the Middle East.
At the time of writing, WTI crude was trading at $93.96, up 7.69%, while Brent crude stood at $91.98, up 4.76% on the day.
The price surge came as shipping disruptions in the Strait of Hormuz intensified fears of a prolonged supply shock, offsetting any downward pressure from the IEA’s unprecedented reserve release.
The IEA said it would release 400 million barrels of oil from strategic reserves held by its member countries in an emergency effort to stabilize global markets shaken by the ongoing conflict involving Iran.
The move dwarfs the 182 million barrels released in 2022 following Russia’s invasion of Ukraine and represents the largest intervention since the agency was created after the 1970s oil crises.
Member countries collectively hold roughly 1.2 billion barrels of strategic reserves, which can be tapped during supply emergencies. The United States, which holds the largest stockpile among IEA members with about 416 million barrels, indicated it could release up to 4.4 million barrels per day if necessary.
Washington later said it would release 172 million barrels from the U.S. Strategic Petroleum Reserve as part of the coordinated effort, adding that it will take “approximately 120 days to deliver based on planned discharge rates”.
Despite the record intervention, oil markets remain focused on the escalating disruption to tanker traffic through the Strait of Hormuz, a narrow waterway responsible for transporting roughly 20% of the world’s oil and liquefied natural gas supply.
Shipping through the strait has slowed dramatically after multiple vessels were struck by projectiles this week. Maritime security firms reported three additional ships hit on Wednesday, bringing the total number of vessels struck since the conflict began to at least 14.
While 400 million barrels is a record-breaking release, it equates to only a few days of global oil production, meaning its impact will be limited if the conflict continues.
Oil prices have surged more than 25% since the conflict began, with Brent briefly touching a four-year high of $119 per barrel earlier this week before retreating on expectations that emergency stockpiles would be deployed.
Iran has warned global markets to prepare for significantly higher prices as tensions continue to escalate, while energy infrastructure disruptions have already begun appearing across the region.
While the IEA’s record-breaking release should help ease pressure on oil prices slightly, traders will remain focused on when and whether oil can once again flow freely through one of the world’s most critical energy chokepoints.
By Josh Owens for Oilprice.com
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