The International Energy Agency said Wednesday that member countries had unanimously agreed to release 400 million barrels of oil from their reserves in a bid to ease prices that are soaring due to the Iran war.
“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 agency did not set out a definitive timeline for when the release — the largest ever by IEA nations — would begin. “The IEA Secretariat will provide further details of how this collective action will be implemented in due course,” a statement said.
Following the IEA announcement, U.S. crude oil traded around $84 per barrel, down only a few dollars from before it, a sign that the market is not expecting this move to provide quick relief or to rapidly increase global supplies.
Since the war with Iran began, the Strait of Hormuz, off its southwestern coast, has been essentially shut to tanker traffic amid threats from its military. An estimated 20 million barrels of oil typically transit the strait every day, helping meet the world’s daily demand for more than 100 million barrels of crude oil.
On Wednesday, the United Kingdom’s maritime trade monitoring agency reported at least three ships hit with projectiles in the region.
As a result, insurers, oil companies and cargo firms have pulled back from operating in the area or transiting the critical waterway. With so much oil and liquified natural gas blocked from reaching the global market, energy prices have soared over the last two weeks.
Since the war began, U.S. crude oil prices are up more than 25%. Retail gas prices have risen more than 50 cents to a national average of around $3.57 per gallon. Natural gas, jet fuel and international oil benchmarks have also jumped significantly.
The IEA’s 32 member countries include the United States, Britain, Japan, Germany, Canada, Australia, Italy and Mexico.
The IEA said that collectively, member countries hold emergency stockpiles of more than 1.2 billion barrels.
As of mid-February, Energy Department data shows that the U.S. has a total of more than 415 million barrels of various types of crude oil sitting in the national strategic petroleum reserve. Other countries, in Europe and Japan, have millions more.
However, it will likely take some time to mobilize the reserves before they hit the global market and potentially delivery price relief.
Once a presidential order is issued to deploy oil from the b national reserve, the Energy Department typically doesn’t begin deliveries for about 13 days, “and additional shipping time is needed before volumes reach end consumers,” JPMorgan Chase commodities analysts wrote in a note Tuesday.
Overall, “policy measures may have limited impact on oil prices unless safe passage through the Strait of Hormuz is assured,” the analysts said, given how much oil is currently blocked from the global market in the region.
Historically, they said, “emergency releases have peaked around 1.4 million barrels per day.” They added that it could be helpful but “that pace would not materially ease a 16 million barrels per day shortfall and would likely provide only initial relief.”
IEA countries have executed emergency releases before, notably an estimated 180 million barrels in 2022, after Russia invaded Ukraine.