Largest-Scale Oil Reserve Release Fails to Fill Supply Gap; International Oil Prices Continue to Rise

(Source: China Electric Power News)

Reprinted from China Electric Power News

Since the market has absorbed the information about the release of strategic oil reserves by member countries of the International Energy Agency, investors continue to focus on the disruption of shipping through the Strait of Hormuz, causing international oil prices to fluctuate higher. After the next trading day opened on the evening of March 11 (Eastern Time), the May delivery London Brent crude oil futures price briefly rose back above $100 per barrel during trading.

At the close on the 11th, the NYMEX April crude oil futures price increased by $3.80, closing at $87.25 per barrel, a gain of 4.55%; the May delivery London Brent crude oil futures price rose by $4.18, closing at $91.98 per barrel, a gain of 4.76%.

The International Energy Agency issued a statement on the 11th saying that 32 member countries unanimously agreed to release 400 million barrels of strategic oil reserves to address the global oil supply tightness caused by the Middle East situation. IEA Director Fatih Birol stated that the release of strategic oil reserves will be implemented in phases within an appropriate timeframe, based on the specific circumstances of each member country.

Birol previously mentioned in a press release that currently, IEA member countries hold over 1.2 billion barrels of public emergency oil reserves, in addition to about 600 million barrels of reserves controlled by government-regulated enterprises.

This release of oil reserves is the largest in history. Market analysts remain cautious in assessing its impact, with ongoing focus on the progress of the Israel-Iran conflict and the situation in the Strait of Hormuz.

Dan Cotsworth, Head of Market Research at UK AJ Bell, said that releasing oil reserves might temporarily ease market concerns, but to fully dispel doubts, the conflict must end completely or at least show a clear path toward de-escalation.

Analysis from UK Wood Mackenzie suggests that the current significant decline in oil exports from Gulf countries, combined with the release of reserves and other alternative sources, cannot fully fill the current supply gap. Additionally, as the member of the IEA with the largest oil reserves, the United States’ strategic reserves are at a low level, limiting its ability to alleviate market supply shortages through reserve releases. Simon Frazer, Chairman and Chief Analyst at Wood Mackenzie, predicts that as the conflict prolongs, international oil prices will continue to rise.

Sasha Fosse, an analyst at UK Marex, said that while releasing oil reserves indeed buys the market some time, the key factors still depend on the duration of the conflict and the situation in the Strait of Hormuz.

Editor: Yan Hongxu

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