Member countries of the International Energy Agency agreed on Thursday to release 60 million more barrels of oil from reserves to tackle soaring prices after Russia’s military offensive in Ukraine.
The move follows last month’s action taken by IEA members where they pledged to release 62.7 million barrels of oil from emergency reserves, the Paris-based agency said.
The 31-member nations of the IEA — which include the US, the world’s largest oil consumer, most of Europe, Australia, Japan, Mexico and others — will now release a total of 120 million barrels from their emergency reserves, the largest release in the agency’s 47-year history.
About half of that amount will come from US reserves, included in Washington’s previously announced decision to release 180 million barrels of oil over six months.
“The unprecedented decision to launch two emergency oil stock releases just a month apart, and on a scale larger than anything before in the IEA’s history, reflects the determination of member countries to protect the global economy from the social and economic impacts of an oil shock following Russia’s aggression against Ukraine,” IEA’s executive director Fatih Birol said.
At the start of the Russia’s war in Ukraine, IEA member countries held 1.5 billion barrels in public reserves and about 575 million barrels under obligations with industry.
IEA's latest co-ordinated drawdown agreement will be the fifth since the agency was created in 1974. Previous collective actions were taken in 1991, 2005, 2011 and last month, it said.
Emergency oil stocks in IEA member countries 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 through tenders or loans to the market, which will be launched and released over the coming weeks
In the case of obligated industry stocks, obligations will be lowered through legislative decrees or administrative mandates, to make the volumes available for consumption, the IEA said.
Over the next six months, around 240 million barrels of emergency oil stocks, the equivalent of more than 1 million barrels per day, will be made available to the global market, the agency said.
“This latest collective action once again demonstrates the unity of IEA member countries in their solidarity with Ukraine and their determination to provide stability to the oil market during this challenging time," Mr Birol said.
“Events in Ukraine are becoming more distressing by the day, and action by the IEA at this time is needed to relieve some of the strains in energy markets."
The latest development comes as oil prices continued to trade higher on supply concerns and rising demand amid a global economic recovery from the coronavirus pandemic.
Oil prices, which rose 68 per cent last year amid faster-than-expected economic rebound, have been extremely volatile this year, rocked by the Russia-Ukraine conflict.
Brent is up about 30 per cent since the start of this year after falling from a 14-year high this month when the benchmark nearly touched $140 per barrel.
Brent, the global benchmark for two-thirds of the world's oil, was trading at 100.70 per barrel at 11.03pm UAE time on Thursday, while West Texas Intermediate, the gauge that tracks US crude, was at $96.35 a barrel.
“Russia’s invasion of Ukraine has introduced a risk premium in oil prices that is likely to remain embedded in markets for months,” said Ehsan Khoman, director of emerging markets research for Europe, the Middle East and Africa at MUFG Bank.
Deliveries of Russian seaborne crude are set to collapse in the second quarter due to sanctions.
“Combined with the simultaneous deficits of depleting inventories and thinning spare capacity amid a dearth of structural under investments still miring the complex, our modelling estimates point to a materially higher oil profile over the near-term," Mr Khoman said.