IEA to release one-third of total oil reserve stock to combat energy crisis
The International Energy Agency (IEA) said on Wednesday that its member countries agreed to unlock 400 million barrels of oil from their reserves, as the US-Israeli war on Iran cut off supplies from the Gulf.
"The oil market challenges we are facing are unprecedented in scale; therefore, I am very glad that IEA member countries have responded with an emergency collective action of unprecedented size," IEA executive director Fatih Birol said.
The release is a historic record for IEA member countries and far exceeds the 182 million barrels of oil they released in 2022 after Russia’s invasion of Ukraine jolted energy markets.
The US, UK, France, Germany, and Turkey are just some of the 32 IEA members that hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government mandates.
"The emergency stocks will be made available to the market over a timeframe that is appropriate to the national circumstances of each member country and will be supplemented by additional emergency measures by some countries," the IEA said.
The statement, however, left key questions unanswered. For example, it did not specify how many barrels per day would be released immediately to offset Iran’s closure of the Strait of Hormuz.
Separately, Japan announced that it would release roughly 80 million barrels from its reserves starting on Monday, equivalent to about 45 days of supply. If that oil hits the market next week, it could be more meaningful in the short term.
Roughly 20 percent of the world’s seaborne crude and natural gas passes through the Strait of Hormuz. In sum, that is around 18 million barrels per day (bpd) of oil and four million bpd of refined product crossing the strait.
The Strait of Hormuz is effectively closed for western vessels as a result of Iranian attacks and insurance companies dropping war risk coverage for vessels. But a shadow fleet of tankers that is used to ferry Iranian crude to China has continued to transit the waterway.
In fact, Iran is exporting more oil than before the war, according to data from energy firm Keplr.
'Bottleneck'
Oil and gas shipments from Kuwait, Bahrain, Iraq, the UAE, and Qatar, however, are effectively blocked from the Strait of Hormuz. The closure has put a spotlight on a 750-mile desert pipeline in Saudi Arabia.
The East-West pipeline runs from the Abqaiq oil field on the kingdom's eastern Gulf coast to the port of Yanbu on the Red Sea, and can transport seven million bpd.
The US and its allies have been able to keep the market price of Brent Crude in check by releasing reserves and leaning on Saudi Arabia’s pipeline, but experts say Brent’s price does not tell the whole story for the global economy.
Brent was trading up 4.46 percent on Wednesday at $91.66 per barrel.
The global economy, however, faces shortages of diesel, jet fuel, and fuel oil, which are refined products of crude oil. Releasing more Brent will not address those shortages unless Gulf refineries can resume exports through the Strait of Hormuz.
“The bottleneck is in the refined products more than crude oil,” Arne Lohmann Rasmussen, chief analyst and head of research at Global Risk Management, told Middle East Eye. “The market and economists don’t understand this.”
This article was sourced from Middle East Eye.
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