The International Energy Agency on Wednesday agreed to release 400 million barrels of oil to address the supply disruption triggered by the Iran war, the largest such action in the organization’s history.

The IEA did not set out a timeline for when the stocks would hit the market. It said that the reserves would be released over a timeframe that is appropriate to the circumstances of each of its 32 member countries.

“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size,” IEA Executive Director Fatih Birol said in a statement.

“Oil markets are global so the response to major disruptions needs to be global too,” Birol said. “Energy security is the founding mandate of the IEA, and I am pleased that IEA Members are showing strong solidarity in taking decisive action together.”

Energy analysts warned ahead of the release that even the IEA’s maximum drawdown capability would likely not be able to offset the nearly 20 million barrels per day that typically transits through the Strait of Hormuz.

The waterway is a narrow maritime corridor off Iran’s coast that connects the Persian Gulf and the Gulf of Oman. Roughly 20% of global oil and gas usually passes through it.

Oil prices have been extremely volatile since the outbreak of the Iran war on Feb. 28, with global benchmark Brent crude rallying to nearly $120 a barrel at the start of the week, before falling back below $90.

Earlier in the day, Japanese Prime Minister Sanae Takaichi said the country intended to release oil stockpiles from its national reserves as early as next week, citing an “exceptionally high level of dependence” on the Middle East.

“Without waiting for an official decision on the release of international stockpiles in cooperation with the International Energy Agency (IEA), Japan has decided to take the lead in releasing its stockpiles as early as the 16th of this month in order to ease supply and demand in the international energy market,” Takaichi told reporters, according to public broadcaster NHK.

IEA members currently hold more than 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation.

The global energy watchdog had previously released an estimated 182 million barrels of oil to support the energy market following Russia’s full-scale invasion of Ukraine in 2022.

Source: CNBC

--Agencies