Paris/London — The International Energy Agency’s member countries could release more oil into the market from strategic stockpiles “as and if needed” after they agreed the largest ever reserves release last week to offset shortages and a spike in prices, its executive director said on Monday.
The comments from Fatih Birol come as the oil price remains above $100 a barrel, having surged as a result of the U.S. and Israeli war on Iran.
The conflict has shut the Strait of Hormuz, through which around a fifth of global oil is usually shipped daily, causing the world’s largest-ever supply shock.
“Despite this huge release, we still have a lot of stocks left,” Birol said in a video statement, referring to the roughly 20% drawdown under last week’s agreement. Reserves still contain about 1.4 billion barrels, he said.
RELEASE CALMED MARKETS, BIROL SAYS
“This quick action by the IEA had a calming impact on markets. Oil prices today are significantly lower than they were one week ago,” Birol said.
Brent crude futures were trading at over $102 per barrel on Monday, up by around $10 from when the reserve release was announced on March 11, but below the near four-year high of $119.50 on March 9.
Analysts have questioned if the release will be sufficient to overcome the disruptions, and stressed that the pace of the release is also crucial.
“Combined global strategic reserves and commercial inventory draws might reach 4–6 million barrels per day at best,” Sparta Commodities CEO Felipe Elink Schuurman said on Monday. “Against a crude deficit of 5–8 million bpd, this does not close the gap.”
Birol did not comment on the daily pace of the stock releases in his video address, but said oil from reserves was already flowing in Asia.
IEA WARNS OF LONGER DISRUPTIONS
Even though the stock release can provide a buffer for now, it is not a lasting solution, Birol said.
“The single most important thing for a return to stable flows of oil and gas is the resumption of transit through the Strait of Hormuz,” he said.
He also warned that even if the Strait were to reopen tomorrow, it would still take time for global energy trade to recover.
The worst-affected countries were oil-importing emerging and developing economies in South and Southeast Asia, as well as key Middle East producers like Iraq losing crucial export revenues, Birol added.
The IEA, created in 1974 after the 1973 oil crisis, groups 32 countries from all continents.
Reporting by Gianluca Lo Nostro in Paris and Robert Harvey in London; Editing by Makini Brice, Tomasz Janowski, Alex Lawler and Andrei Khalip – Reuters
