Following market volatility from initial reports of a potential release, the International Energy Agency (IEA) has unanimously agreed to draw down 400 million barrels of emergency oil reserves—its largest ever—to combat surging energy prices due to Middle East conflict disrupting the Strait of Hormuz. Executive Director Fatih Birol called the oil market challenges 'unprecedented,' with stability depending on resuming Hormuz transit after prices hit nearly $120 a barrel.
Building on Tuesday's reports of a proposed IEA release that briefly eased then rebounded oil prices, the agency announced Wednesday its unanimous decision among members to release 400 million barrels from emergency reserves. This surpasses the 182 million barrels deployed in 2022 after Russia's Ukraine invasion and addresses disruptions from halted traffic in the Strait of Hormuz, which handles 20% of global seaborne oil.
Middle Eastern producers have intensified supply cuts: Saudi Arabia (2-2.5 million bpd), Iraq (2.9 million, largest relative), UAE (500k-800k), and Kuwait (~500k), totaling 6.7 million bpd or 6% of global supply. Pressures mounted after a drone attack prompted the UAE to close its Ruwais refinery. Japan plans a separate 80 million-barrel release from March 16. IEA members hold over 1.2 billion barrels in public reserves plus 600 million in industry stocks; the US SPR has 415 million.
Analysts like JPMorgan's Natasha Kaneva expect major US contributions, though Citigroup estimates Gulf losses at 11-16 million bpd exceed max US drawdowns. Kpler's Humayun Falakshahi emphasized release speed for supply gaps. Past IEA actions include 1991 Gulf War, 2005 hurricanes, 2011 Libya, and 2022.
