The 31 Member Countries of the International Energy Agency (IEA), have confirmed their individual contributions to an initial response plan to reduce the spate of increasing spikes in oil prices resulting from the war between Russia and Ukraine, in a statement released by the IEA.

When Members last met was on March 1, 2022, since which time, each Member Country has been considering how much it could contribute to make 60 million barrels of strategic reserves available to the market, taking into account each country’s domestic circumstances.

“The commitments submitted by Members actually surpassed 60 million barrels, demonstrating great solidarity,” the IEA said, adding that this turn of events sends a unified and strong signal to global oil markets that there will be no supply shortfalls due to the Russia-Ukraine crisis.

According to the release, IEA Member Countries hold 1.5 billion barrels in public reserves and about 575 million barrels under obligations with industry. As a result, this initial response of 61.7 million barrels represents just 3 per cent of total emergency reserves, the IEA added.

“The decision taken to release emergency stocks– for only the 4th time in the IEA’s history – has sent a strong message that IEA Members are unified in support of Ukraine and will do all they can to provide stability to the market during these difficult days,” said IEA Executive Director Fatih Birol.

“Events in Ukraine remain deeply distressing and the impacts on energy markets are becoming more pronounced. We continue to monitor the situation closely. If necessary, we are ready to recommend additional steps to build on this initial release.”
Fatih Birol

Countries’ Specific Contributions to Emergency Oil Stock

The strategic reserves held by member countries are based on different structures. They are either in the form of public stocks (government-owned or by specialised agencies), or stocks held by industry under an obligation of the government.

In the case of public stocks, these can be released via tenders or loans to the market, which will be launched and released over the coming weeks depending on the specific stockholding system in each country.

In the case of obligated industry stocks, obligations will be lowered, via legislative decrees or administrative mandates, to make the volumes available for consumption. This can take a matter of days, the IEA said.

Regards the pledges made by Member Countries, the USA pledged to make available 30 million barrels of oil, the highest of the pledged contributions, followed by Japan which pledged 7 million barrels of oil, Korea pledged 4.4 million barrels of oil while the rest of the countries pledged below 4 million barrels.

Russia’s role in the global energy market cannot be downplayed. It is the world’s third largest oil producer and the largest exporter. Its exports of about 5 million barrels a day of crude oil represent roughly 12 per cent of global trade– and its approximately 2.85 million barrels a day of petroleum products represent around 15 per cent of global refined product trade. Around 60% of Russia’s oil exports go to Europe and another 20 per cent to China.

Whether the release of the emergency oil stock would be enough to cushion the market as the Russia-Ukraine crisis drags cannot be ruled out as analysts are of the view that sanctions on Russia could destabilize the market. The real test for the market is not so far away.