Oil Prices Resume Uptrend as Traders Ignore Expectations of Record-Scale Crude Reserves Release

Source: Global Market Report

Despite reports that the International Energy Agency will conduct the largest-ever emergency oil reserve release, oil prices rose early Wednesday.

As of 3:36 a.m. Eastern Time, global benchmark Brent crude futures increased by 0.7% to $88.39 per barrel; U.S. crude rose by 1.3% to $84.55 per barrel.

On Tuesday, G7 energy ministers held a meeting in Paris to discuss the US-Iran conflict and its impact on global oil and natural gas markets. The conflict has disrupted energy production in the Middle East and led to the blockade of the crucial Strait of Hormuz.

Media reports Tuesday evening indicated that the IEA proposed an unprecedented large-scale release of strategic oil reserves, exceeding the 182 million barrels released by member countries after the full outbreak of the Russia-Ukraine conflict in 2022. Countries will decide on whether to release emergency oil reserves on Wednesday.

The IEA has not immediately responded to media requests for comment.

In a statement Tuesday, IEA Director Fatih Birol said member countries currently hold over 1.2 billion barrels of public emergency oil reserves, in addition to 600 million barrels of industry reserves held under government regulations.

Birol stated, “The recent conditions in the oil market continue to deteriorate.” He pointed out that transportation disruptions and significant reductions in oil production are the main reasons.

“This is creating significant and escalating risks for the market,” he added, “We are discussing all feasible options, including releasing emergency oil reserves from the IEA.”

On Tuesday, U.S. Energy Secretary Chris Wray’s social media account incorrectly claimed that the U.S. Navy escorted an oil tanker through the Strait of Hormuz, causing a sharp drop in oil prices.

White House Press Secretary Karine LeVine later told reporters that the U.S. Navy “has not currently provided escort for any oil tankers or ships.”

Sasha Foss, an energy market analyst at Marex, said Wednesday, “We do believe that the key factor remains the duration of the war. Therefore, the IEA’s reserve release can only buy us a few days, but ultimately everything depends on whether the Strait of Hormuz can reopen.”

Foss added, “This conflict must end by the end of this week, or oil prices will surge back above $100.”

Other market observers also warned that if the US-Iran conflict continues to drag on, oil prices could again break through the $100 mark.

Paul Guden, head of global natural resources at 91 Asset Management, said in a Tuesday report, “If the situation eases in the coming weeks, oil prices could fall… but even then, it’s unlikely they will return to the $60-$70 range seen earlier this year.”

“If supply disruptions persist longer, the consequences will be more severe. Oil prices could further surge—potentially breaking above $120 or higher—until high prices start to suppress demand.”