The International Energy Agency (IEA) has sent shockwaves through the energy market with a proposal for the largest release of strategic oil reserves in its history. This move aims to curb skyrocketing crude prices amid the US-Israel war with Iran, as reported by the Wall Street Journal, citing officials familiar with the matter. The release is expected to exceed the 182 million barrels of oil deployed by IEA member states in two separate interventions in 2022, following Russia’s full-scale invasion of Ukraine. Currently, oil is experiencing extreme fluctuations, with Brent crude returning to levels above $90 per barrel.
Emergency meeting and critical decision
The IEA convened an emergency meeting of its members on Tuesday, with a final decision on the proposal expected the following day. The plan could be adopted provided there are no objections; however, even a protest from a single member nation could delay its implementation.
G7 supports the move but awaits finality
On Tuesday, G7 energy ministers failed to reach an agreement on an immediate release of strategic oil stocks, requesting that the IEA first conduct a full assessment of the situation. "Although no country is currently facing a physical shortage of crude oil, prices are rising sharply, and the situation cannot remain without intervention," a G7 source told Reuters. The same source, speaking on condition of anonymity, noted that G7 nations generally support a coordinated release of oil reserves under IEA coordination.
Technical details prior to implementation
However, the actual release cannot commence immediately, as decisions must first be reached regarding the total volume, the allocation among countries, and the implementation timeline. The IEA secretariat is expected to present potential scenarios based on the projected impact on markets, while there may also be communication with non-member countries such as China and India. Neither the IEA nor the White House immediately responded to requests for comment. South Korea, an IEA member, is participating in the discussions and evaluating its stance, according to a spokesperson for the country's Ministry of Industry.
Oil price roller coaster and the US error regarding Hormuz
Oil prices are showing dramatic fluctuations as traders attempt to decipher conflicting signals regarding the consequences of the US and Israeli war against Iran. Brent, the international benchmark, recorded a 17% drop on Tuesday, falling below $80 per barrel. It then recovered quickly, nearing $90, following a post by US Energy Secretary Chris Wright on the X platform, which was deleted shortly thereafter. In that post, Wright claimed that the US Navy had escorted a tanker through the Strait of Hormuz.
White House denial
White House Press Secretary Karoline Leavitt later clarified that there had been no armed escort of a vessel through the strait. The Strait of Hormuz has essentially remained closed to navigation in the region due to threats from Iran, according to Al Jazeera. Oil prices plummeted again early Wednesday after the Wall Street Journal report that the IEA is considering its largest ever strategic reserve release to maintain global supply stability. Currently, Brent futures are trading at $89.89 per barrel, up 2.4%, while US WTI crude is up 2.3% at $85.47 per barrel.
Forecasts for a new price explosion
Several analysts warn that a prolonged war between the United States and Iran could push oil prices back above the $100 threshold. Paul Gooden, head of global natural resources at Ninety One, stated in an analysis that if tensions de-escalate in the coming weeks, prices could retreat. However, even in this scenario, it is considered unlikely that they will return to the $60 to $70 range recorded earlier this year. If the market disruption lasts longer, the consequences will be more severe. In that case, prices could soar even higher—potentially exceeding $120 per barrel—until high costs begin to suppress demand.
Shock warning from Aramco
In a startling warning, the CEO of the Saudi oil giant Aramco, Amin Nasser, emphasized that the war with Iran will have "catastrophic consequences" for the global oil market. Specifically, Amin Nasser stated during a conference call with analysts that the war has triggered a "severe chain reaction" and a "drastic domino effect" beyond shipping, affecting aviation, agriculture, the automotive industry, and other sectors. "There will be catastrophic consequences for the global oil market. The longer the disruption lasts, the more drastic the consequences will be for the global economy," he said, adding that this is "by far the greatest crisis" the region's oil and gas industry has ever faced. It is recalled that Aramco's Ras Tanura refinery was hit by a projectile last week amid widespread Iranian drone and missile attacks on Gulf states in response to US and Israeli strikes against Iran. According to Nasser, the fire was quickly extinguished, and the refinery is currently in the process of restarting operations.
www.bankingnews.gr
Σχόλια αναγνωστών