BY COMFORT OGBONNA
Oil prices continued to decline on Wednesday, as reports emerged that the International Energy Agency (IEA) is considering the largest release of oil reserves in its history to counter potential supply disruptions stemming from the escalating U.S.-Israeli conflict with Iran. The announcement weighed heavily on market sentiment, driving Brent futures down 88 cents, or 1%, to $86.92 a barrel by 0451 GMT, while U.S. West Texas Intermediate (WTI) fell 35 cents, or 0.4%, to $83.10 a barrel.
Earlier in the week, U.S. crude prices had surged 5% at market open, following a steep drop of more than 11% on Tuesday—the largest one-day percentage decline since 2022—after former President Donald Trump predicted a rapid resolution to the conflict. On Monday, WTI had climbed above $119 a barrel, reaching its highest level since June 2022.
The proposed IEA drawdown would surpass the 182 million barrels released by member countries in 2022 during the onset of Russia’s full-scale invasion of Ukraine. Analysts at Goldman Sachs estimated that such a release could offset roughly 12 days of the 15.4 million barrels-per-day disruption in Gulf exports caused by the ongoing tensions.
The military conflict intensified on Tuesday, with U.S. and Israeli forces conducting what both Pentagon officials and Iranian sources described as the most intense airstrikes of the war so far. The U.S. military also neutralized 16 Iranian mine-laying vessels near the Strait of Hormuz, according to the U.S. Central Command, amid warnings from Trump that any mines in the strategic waterway must be removed immediately. While Trump has stated that the U.S. is prepared to escort tankers through the Strait if necessary, the U.S. Navy has reportedly declined requests from the shipping industry for military escorts due to the elevated risk of attacks.
Analysts noted that oil markets remain volatile. UOB analysts observed that “oil prices continued to normalize lower in a volatile fashion following Monday’s sharp spike,” and added that investor attention is likely to remain focused on Middle East developments as they evaluate how long energy prices may stay elevated. Meanwhile, G7 officials convened online to discuss a potential coordinated release of emergency oil stockpiles to stabilize global markets. French President Emmanuel Macron hosted a video call with other G7 leaders to assess the impact of the conflict on energy and explore measures to mitigate price shocks.
Despite these measures, some analysts expressed skepticism about the effectiveness of the proposed IEA release. Philip Jones-Lux, senior analyst at Sparta Commodities, highlighted that no formal release has been announced and that questions remain regarding the speed at which reserves could realistically be drawn, noting that “the core issue is not the size of reserves, it is the achievable draw rates.”
Supply concerns continue to mount. Abu Dhabi’s state-owned ADNOC temporarily shut its Ruwais refinery following a fire triggered by a drone strike, marking another disruption to Gulf energy infrastructure. Saudi Arabia, the world’s largest oil exporter, is attempting to increase shipments via the Red Sea, but current levels are insufficient to fully compensate for reduced flows from the Strait of Hormuz. The kingdom is relying on the Red Sea port of Yanbu to boost exports as neighboring producers, including Iraq, Kuwait, and the United Arab Emirates, have already curtailed output.
Energy consultancy Wood Mackenzie warned that the ongoing conflict is currently cutting Gulf oil and oil product supply by approximately 15 million barrels per day, which could potentially drive crude prices toward $150 per barrel. Morgan Stanley echoed the warning, noting that even a swift resolution would likely entail weeks of market disruption. Reflecting ongoing strong demand, U.S. crude, gasoline, and distillate inventories fell last week, according to figures cited by market sources from the American Petroleum Institute.
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