The International Energy Agency has ordered the largest release of government oil reserves in its history to help calm the oil price shock triggered by the US-Israeli attacks on Iran.

The agency disclosed that its 32 members had agreed unanimously to release about 400m barrels of emergency crude from their emergency reserves to the market to address disruptions stemming from the war.

The 400 million barrels represents a third of the group’s total government stockpiles and more than double the IEA’s previous biggest release. The emergency intervention far outstrips the 2022 release of 182m barrels of oil by IEA countries after Russia’s full-scale invasion of Ukraine.

The IEA said the emergency stocks would be made available to the global market, which has lost about 15m barrels of crude a day because of a block on trade via the strait of Hormuz, over a timeframe appropriate to the national circumstances of each member, bolstered by supplementary emergency measures from some countries.

The UK promised to release 13.5m barrels from its emergency stocks. The country held 120 days’ worth of oil stocks at the end of last year, although 100% of this was held by companies in the industry under an agreement with the government.

The stocks are held in refineries, oil terminals, power stations and at offshore fields in the North Sea. About 15% of the stockpile is held in overseas countries, including the Netherlands, Belgium and Germany.

Japan’s Prime Minister, Sanae Takaichi, said that the country, which relies on the strait of Hormuz for about 70% of its oil imports, would “act first” to release about 80m barrels from its private and national oil reserves from 18 March to help calm global oil markets.

Germany’s Economy Minister, Katherina Reiche, told reporters in Berlin that the German government would release the equivalent of 19.51m barrels of crude as part of the IEA’s historic release of crude.

“We will comply with this request and contribute our share, because Germany stands behind the IEA’s most important principle: mutual solidarity.”
Katherina Reiche

The historic market intervention will deliver the equivalent of about 26 days of crude typically delivered via the vital oil trade artery, where deliveries have ground to a halt because of the threat of attack from Tehran.

At least 13 commercial vessels have come under attack in the region since the war began, including three on Wednesday as Iran’s military said the world should be prepared for oil to hit $200 (£149) a barrel.

Although no G7 countries have faced physical shortages of oil since the war began last month, the price of Brent crude has fluctuated wildly, briefly jumping as high as $119.50 a barrel on Monday, which took it to levels not seen since 2022.

Shipments of oil and seaborne gas from the Middle East have struggled to reach the global market for almost two week as result of the effective closure of the strait of Hormuz, a key shipping lane off the coast of Iran through which about a fifth of global oil and seaborne gas tankers pass.

Oil is now sitting at about $90 a barrel after reports that the G7 would meet to discuss a market intervention.

IEA Executive Director Welcomes Decision

The IEA’s Executive Director, Fatih Birol, said that oil markets are global “so the response to major disruptions needs to be global, too.”

“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.”
Fatih Birol

Birol noted that the emergency stocks will be made available to the market over a timeframe that is appropriate to the national circumstances of each member country.

The coordinated stock release is the sixth in the history of the IEA, which was created in 1974. Previous collective actions were taken in 1991 during the first Gulf War, in 2005 following Hurricane Katrina in the US, in 2011 during the war in Libya, and twice in 2022 following Russia’s invasion of Ukraine.

Members of the IEA, which was set up after the Middle East oil crisis in the 1970s, are required to hold at least 90 days’ worth of crude supplies in reserve, which can be released to the market in the event of a supply shock.

In total, its members hold more than 1.2bn barrels of public emergency oil stocks and a further 600m barrels of stocks held by industry under government obligation.

Following the IEA’s decision, the G7 Finance Ministers are expected to meet and decide how to move on the energy agency’s recommendation.