Global energy officials are weighing the largest coordinated release of emergency oil reserves ever proposed as supply disruptions linked to the ongoing Middle East conflict continue to disrupt global markets, according to an exclusive report by the Wall Street Journal.
Officials familiar with the discussions said the International Energy Agency (IEA) has circulated a proposal among its 32 member countries to release crude from strategic reserves in an effort to stabilize surging prices following the near-total disruption of tanker traffic through the Strait of Hormuz.
The proposed drawdown would exceed the 182 million barrels released in two coordinated actions in 2022 after Russia’s invasion of Ukraine. Member countries are expected to decide on the plan Wednesday (March 11) during an emergency consultation convened by the agency.
Oil markets strained by Gulf supply disruption
The Strait of Hormuz, a narrow maritime corridor connecting the Persian Gulf to international markets, normally carries roughly one-fifth of the world’s daily oil supply.
However, continuous attacks on passing tankers and the escalating security risk in the region have brought shipments through the waterway close to a halt.
Since the US and Israel launched strikes on Iran in late February, crude prices have surged sharply amid fears of a prolonged supply shock. Oil briefly climbed above US$100 per barrel and at one point approached US$120 before retreating as markets reacted to the developing conflict.
Map of the Strait of Hormuz, with surrounding countries.
Fajar / Adobe Stock
Despite the pullback, the price of refined fuels such as diesel has continued to rise, raising concerns about broader economic fallout. Economists warn that sustained high energy prices could drive inflation higher, pressuring financial markets and increasing fuel costs for consumers worldwide.
IEA Executive Director Fatih Birol said global oil markets have deteriorated significantly in recent days.
“In oil markets, conditions have deteriorated in recent days,” Birol said in an IEA statement following a meeting of G7 energy ministers at the agency’s Paris headquarters.
“In addition to the challenges of transit through the Strait of Hormuz, a substantial amount of oil production has been curtailed. This is creating significant and growing risks for the market.”
The IEA was created in 1974 in response to the Arab oil embargo and coordinates emergency actions among industrialized nations when major supply disruptions threaten global energy security.
Member countries currently hold more than 1.2 billion barrels of government-controlled emergency oil reserves, along with roughly 600 million barrels of mandatory industry stocks.
Together, those inventories represent about 124 days of lost supply from the Gulf, based on current estimates.
G7 backs potential emergency measures
Energy ministers from the Group of Seven (G7) major economies signaled support for the use of strategic reserves if necessary to stabilize markets.
“Working alongside the IEA, we are vigilantly monitoring energy market trends and are coordinating within the G-7 and with our international partners, IEA member countries, and beyond,” the ministers said in a joint statement as reported by Bloomberg.
They added that the group supports “the implementation of proactive measures to address the situation, including the use of strategic reserves.”
Markets have already responded to the possibility of a coordinated release. Brent crude briefly dropped below US$90 per barrel earlier this week as reports emerged that governments were considering tapping stockpiles.
But oil prices resumed climbing in Asian trading on Wednesday as traders weighed how long Middle Eastern supply disruptions could last.
Production across several Gulf states has already begun to decline as exporters struggle to ship crude through the threatened shipping lane. Major producers in the region have reportedly cut output by more than five million barrels per day as storage facilities fill and tankers remain unable to load cargo.
Meanwhile, some governments have started preparing their own emergency responses even before a coordinated decision is reached. Japan said it plans to release oil reserves as early as Monday (March 16) to offset expected supply disruptions.
Tokyo intends to release 15 days’ worth of privately held oil reserves and one month of government stockpiles while also drawing on joint reserves held with oil-producing nations.
Markets react to extreme volatility
Energy analysts say the prospect of coordinated stockpile releases has already begun influencing market behavior.
“Crude oil closed slightly below the US$100 mark after spiking to nearly US$120 per barrel earlier today,” Tullis said. “Helping to bring prices back down were reports that the G7 countries are considering releasing 300-400 million barrels in total from their strategic reserves.”
For instance, the IEA coordinated a record release of emergency reserves in 2022 after Russia’s invasion of Ukraine.
Although prices initially rose as traders interpreted the move as a sign of a severe crisis, the additional supply later helped ease market pressure.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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