The International Energy Agency (IEA) is considering an unprecedented intervention in the oil market by releasing a record amount of oil from the strategic reserves of member states to temper the price increase caused by the conflict in the Middle East.
According to the Wall Street Journal, the plan discussed at an extraordinary IEA meeting in Paris involves putting over 182 million barrels of oil on the market, an amount equivalent to approximately two days of global consumption. If approved, this would become the most extensive such coordinated program in history.
The final decision is expected to be made on Wednesday afternoon by the 32 member states of the IEA, an organization dominated by the developed economies of the G7. However, the adoption of the plan is not guaranteed, as opposition from even a single state could delay or block the initiative.
Measure to Offset the Blockade in the Strait of Hormuz
The intervention aims to counteract major disruptions in global oil supply following the closure of the Strait of Hormuz, one of the world's most important energy routes. Approximately a fifth of the world's oil and fuel shipments transit this strait, connecting the Persian Gulf to the Indian Ocean.
The IEA member states collectively hold around 1.2 billion barrels of oil in strategic reserves, which could offset Persian Gulf deliveries for about four months in the event of a major supply crisis.
The 2022 Experience Shows Effects Can Be Limited
Previous market interventions have had mixed results. In 2022, following Russia's invasion of Ukraine, IEA member states released 182 million barrels of oil in two stages to stabilize the market.
Although the measure was one of the most extensive in history, it also signaled that the world is facing a prolonged energy crisis. In the following months, the price of oil continued to rise, reaching a peak in the summer of the same year.
- Oil Prices Drop by Approximately 11% After the US Navy Escorts a Tanker Through the Strait of Hormuz
First Signs of Market Calming
Despite tensions, the oil market seems to show the first signs of stabilization. According to Agerpres, on Wednesday morning, the European benchmark oil price fell below $90 per barrel, returning to levels close to those recorded before the recent sharp increase.
Earlier in the week, prices briefly exceeded $100 per barrel, and on some markets, they even rose towards $120, amid fears that the regional conflict could severely impact global oil flows.