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Washington — International Energy Agency (IEA) member states agreed to tap 60-million barrels of oil from strategic storage, the director of the group said on Wednesday, in a move aimed at cooling prices after Russia’s invasion of Ukraine.
The plan by IEA countries, which represent 31 mostly industrialised countries but not Russia, was agreed to on Friday and would be their second co-ordinated release in a month and the fifth in the agency’s history to confront oil market outages.
“The IEA is moving ahead with a collective oil stock release of 120-million barrels (including 60-million barrels contributed by the US as part of its overall draw from its strategic petroleum reserve (SPR),” IEA executive director Fatih Birol tweeted.
It was the largest release from non-US IEA countries on top of the largest draw from the US at 180-million barrels over six months. “This will supplement our 1-million barrels per day (bpd) for six months and of course will serve as a bridge until the end of the year when domestic production ramps up,” a US official said on condition of anonymity.
Sanctions and buyer aversion have disrupted Russian oil supplies, pushing oil near $140 a barrel on March 7 despite the previous IEA release of 60-million barrels, with half of that coming from the US, about a week earlier. Russia calls its actions in Ukraine a “special operation”.
Markets appeared to be cheered by the latest IEA move, with Brent oil falling about 5% to about $101.50 a barrel on Wednesday.
IEA members hold emergency stockpiles of 1.5-billion barrels.
The timing of when the additional 60-million barrels from non-US IEA countries would come to market was not immediately clear. Birol said details on specific contributions would be made public soon.
In the past three releases co-ordinated by Washington and its IEA allies, the US provided half or a little less than the total volume.
Analysts have said that the tapping of finite supply to plug reduced flows in the oil market may not succeed at bringing down prices in the long term.
Claudio Galimberti, senior vice-president of analysis at consultancy Rystad Energy, said the US SPR release of 1-million barrels per day (bpd) would struggle to plug potential lost Russian output of over 2-million bpd.
“This historically large SPR release is the right decision in the current crisis and consumers should feel the benefit soon, but it only solves half the problem.”
The move comes as the US and allies struggle with multi-decade high inflation and rising energy and gasoline prices. High fuel prices are a vulnerability for US President Joe Biden’s fellow Democrats ahead of the November 8 congressional elections.
“The SPR releases could make explicit energy sanctions on Russian oil exports more feasible without blowing up the oil price completely,” said Bjarne Schieldrop, chief commodities analyst at SEB bank in Oslo.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.