Oil prices fluctuated on Wednesday following a report by the Wall Street Journal indicating that the International Energy Agency (IEA) is considering its largest ever release of oil reserves to counter supply disruptions caused by the ongoing conflict in Iran.
As of 0129 GMT, Brent crude futures had risen by 11 cents, or 0.13%, reaching $87.91 per barrel, while U.S. West Texas Intermediate (WTI) saw a 7-cent increase, or 0.08%, to $83.52 per barrel. Both contracts experienced a decline shortly after the WSJ report, reversing earlier gains in WTI.
The proposed IEA drawdown would surpass the 182 million barrels of oil released by IEA member countries in two instances during 2022, following Russia’s invasion of Ukraine, according to the WSJ, citing sources familiar with the situation. Both the IEA and the White House have yet to respond to Reuters’ requests for comment.
On Tuesday, the U.S. and Israel launched intense airstrikes on Iran, described by the Pentagon and local sources as the most severe of the conflict. Additionally, the U.S. military reported the elimination of 16 Iranian mine-laying vessels near the Strait of Hormuz, as President Donald Trump demanded the immediate removal of any mines laid by Iran in the Strait.
President Trump has reiterated the U.S. commitment to escorting tankers through the Strait of Hormuz if necessary. However, Reuters sources indicate that the U.S. Navy has declined requests from the shipping industry for military escorts due to heightened attack risks.
Tony Sycamore, a market analyst at IG in Sydney, noted in a report, “We continue to expect crude oil to remain highly volatile, driven by headlines while trading within a wide range between $75ish and $105ish in the sessions ahead.”
Oil prices experienced a significant drop of over 11% on Tuesday, marking the steepest decline since 2022. This followed President Trump’s prediction of a swift end to the war and came after prices had surged to a session high above $119 per barrel on Monday, the highest since June 2022.
G7 officials have convened online to discuss the potential release of emergency oil reserves to mitigate market impacts. French President Emmanuel Macron is set to host a video call with other G7 leaders on Wednesday to address the conflict’s impact on energy and potential countermeasures.
According to a source, Abu Dhabi’s state oil company, ADNOC, has shut down its Ruwais refinery due to a fire caused by a drone strike, marking another disruption to energy infrastructure amid the U.S.-Israeli conflict with Iran.
Saudi Arabia, the world’s largest oil exporter, is reportedly increasing supplies via the Red Sea, although current levels remain insufficient to offset reduced flows from the Strait of Hormuz, as shown by shipping data. The kingdom is leveraging its Red Sea port of Yanbu to boost exports and prevent substantial production cuts, as neighboring countries Iraq, Kuwait, and the United Arab Emirates have already reduced output amid the conflict.
Energy consultancy Wood Mackenzie has reported that the war is currently reducing Gulf oil and oil product supplies by approximately 15 million barrels per day, which could potentially drive crude prices up to $150 per barrel. Morgan Stanley noted, “Even a quick resolution probably implies weeks of disruption for energy markets yet.”
Reflecting increased demand, U.S. crude, gasoline, and distillate stocks fell last week, according to market sources citing American Petroleum Institute figures released on Tuesday.
