The United States and other major energy-intensive countries have agreed to extract 60 million barrels of oil from their emergency reserves to address fears of supply depletion after Russia invaded Ukraine, concerns highlighted by the huge rise in crude oil prices. in Tuesday.
The International Energy Agency said the coordinated release, the fourth in its history, would send a “united and strong message to global oil markets that there will be no shortage” due to the invasion. The body will consider “possible additional emergency oil stocks if necessary,” he added.
But instead of calm prices, the announcement sparked additional gains, with crude Brent, international oil, rising nearly 10 percent to a new eight-year high above $ 107 a barrel before retiring. West Texas Intermediate, U.S. oil, rose more than 10 percent to $ 105 a barrel.
As European refineries refrain from buying their oil, Russia’s leading Urals oil is trading at a record discount of more than $ 11 a barrel against Brent.
Amrita Sen, of the consulting firm Energy Aspects, said the market was “overwhelmed” by the release of reserves and that traders expected more due to the disruption of Russian energy exports caused by the broad side of Western sanctions against Moscow.
She said as much as 70 per cent of the country’s oil exports “do not find a home at the moment”. According to traders, many Western banks and shipowners are refusing to process Russian crude oil to reduce legal or reputational risk.
Russia is the world’s third-largest crude producer and second-largest exporter, sending about 5 million barrels a day to world markets.
Biden officials said they wanted to try to ensure that Russian energy continued to flow to minimize domestic economic damage from the sanctions. Half of the IEA’s coordinated oil spill, or 30 million barrels, will come from the US strategic oil reserves, said Jennifer Granholm, the US Secretary of Energy.
Earlier, the United States announced the release of 50 million barrels of oil from its strategic reserve to try to ease rising oil prices late last year, along with a smaller group of other countries.
However, as oil passes through the U.S. system, there is only limited spare capacity – approximately 150,000 barrels per day – to move more volumes, the senator said. This will remain the case until the previous release of the strategic reserve is completed in June.
The IEA’s announcement Tuesday came on the same day that members of the OPEC + alliance of oil exporters, which includes Russia, met for the first time since Moscow launched its invasion of Ukraine last week. But the group, which is struggling to maintain its own production targets, has signaled that it does not intend to accelerate the planned increase in production in response to higher prices.
“Global energy security is under threat, putting the global economy at risk during a fragile recovery phase,” said Fatih Birol, IEA’s chief executive.
The release of 60 million barrels by the IEA represents about 4% of members’ 1.5 billion barrels of total emergency supplies, the group said. Global oil demand is about 100 million barrels per day.
Founded after the Arab oil embargo in 1973-74, the IEA consists of 31 member states in Europe, North America and Asia and represents the interests of major energy consumers. The group’s previous coordinated edition was in 2011, when supplies were cut off by the Libyan civil war.
The agency said its board “encourages each member state to do everything possible to support Ukraine in the supply of petroleum products, urging governments and consumers to maintain and step up conservation efforts.”
IEA members also discussed Europe’s dependence on natural gas from Russia. On Thursday, the agency said it would launch a “10-point plan on how European countries can reduce their dependence on Russian gas supplies by next winter.”