Oil prices moved higher on Wednesday as traders questioned whether a reported plan by the International Energy Agency to release record levels of emergency reserves would be enough to counter potential supply disruptions linked to the U.S.-Israeli conflict with Iran.
Brent crude futures rose 59 cents, or 0.7%, to $88.39 per barrel by 07:27 GMT. U.S. West Texas Intermediate (WTI) crude climbed 98 cents, or 1.2%, to $84.43 per barrel.
Both benchmarks had extended earlier losses during Asian trading hours after plunging by more than 11% on Tuesday, even though U.S. crude briefly jumped about 5% at the start of that session.
According to the Wall Street Journal, the IEA is considering a strategic reserve release larger than the 182 million barrels that member countries collectively brought to market in two rounds during 2022 after Russia’s full-scale invasion of Ukraine. The newspaper cited officials familiar with the discussions.
Analysts at Goldman Sachs said in a note to clients that a reserve release of that scale would offset roughly 12 days of disruption, based on the bank’s estimate of a 15.4 million barrel-per-day interruption to Gulf exports.
On Tuesday, the United States and Israel launched what both Pentagon officials and Iranian sources described as the most intense wave of airstrikes of the conflict so far.
The U.S. military also “eliminated” 16 Iranian vessels believed to be involved in laying naval mines near the Strait of Hormuz, according to U.S. Central Command, as President Donald Trump warned that any mines deployed by Iran in the strategic waterway must be cleared immediately.
Some market observers expressed doubts about whether an emergency reserve release would significantly influence prices.
“Moves like IEA SPR release are not the solution to the crisis. How oil prices will evolve will depend on the duration of the Iran war,” said DBS energy sector team lead Suvro Sarkar.
Near-term price gains could be “reined in through periodic strategic signalling moves like we have seen over the past couple of days to calm markets down”, Sarkar added.
Officials from the Group of Seven have also held online discussions about the possibility of releasing emergency oil reserves to cushion the market from supply shocks.
French President Emmanuel Macron is scheduled to host a video conference with other G7 leaders on Wednesday to examine how the conflict in the Middle East is affecting energy markets and to discuss potential responses.
Trump has repeatedly stated that the United States is prepared to escort tankers through the Strait of Hormuz if necessary. However, sources told Reuters that the U.S. Navy has declined requests from the shipping industry for military escorts for the time being, citing the high risk of attacks.
Supply concerns persist
Abu Dhabi’s state energy company ADNOC has shut down its Ruwais refinery after a fire broke out at a facility within the complex following a drone strike, according to a source. The incident marks another disruption to energy infrastructure linked to the U.S.-Israeli war with Iran.
Saudi Arabia, the world’s largest oil exporter, is believed to be increasing shipments through the Red Sea, although the volumes remain well below the levels required to fully offset the decline in flows through the Strait of Hormuz, according to shipping data.
The kingdom is relying on the Red Sea port of Yanbu to help raise exports and avoid sharp production cuts, while neighbouring producers including Iraq, Kuwait and the United Arab Emirates have already reduced output.
Energy consultancy Wood Mackenzie estimates that the conflict is currently removing around 15 million barrels per day of Gulf oil and petroleum products from global markets, a disruption that could potentially push crude prices as high as $150 per barrel.
“Even a quick resolution probably implies weeks of disruption for energy markets yet,” Morgan Stanley said in a note.
Reflecting stronger demand, U.S. inventories of crude oil, gasoline and distillates declined last week, according to market sources citing data released Tuesday by the American Petroleum Institute.