G7 member states have not yet decided whether to release emergency oil stocks amid the escalating Iran war, as oil traded above $100 per barrel for the first time since Russia invaded Ukraine in early 2022.
"We are not there yet," French Finance minister Roland Lescure said after the meeting.
The emergency meeting of the group, which is made up of Canada, France, Germany, Italy, Japan, the UK and the US, comes as top buyers of Middle East crude scramble to find alternative supplies to ease inflationary pressures on their economies.
Brent crude surged as high as 28 per cent in one session to $119.5 a barrel in Asian trading before pulling back to $110.85 per barrel after news of the meeting emerged. West Texas Intermediate, the gauge for US crude, hit $116.45 per barrel before retreating to around $108.
Three G7 nations, including the US, have expressed support for a joint release. Some US officials believe a drawdown of 300-400 million barrels, equivalent to 25 per cent to 30 per cent of the International Energy Agency's 1.24 billion barrels of public emergency stocks, would be appropriate, the Financial Times reported on Monday.
IEA executive director Fatih Birol, who participated in Monday's meeting in Paris, said ministers discussed all options, including making IEA emergency oil stocks available to the market. In a statement, Mr Birol said he told ministers that global oil markets have "deteriorated in recent days" because of the closure of the Strait of Hormuz and a substantial cutback in production. "This is creating significant and growing risks for the market," he added.
In addition to the 1.2 billion barrels of public emergency oil stocks, IEA members also hold around 600 million barrels of industrial stocks.
Last week, Mr Birol said there were "no plans for collective action at this stage", owing to what he said was "plenty of oil in the market".
The spike in oil has alarmed the Gulf states’ top buyers, including China, India, Japan and South Korea, which collectively accounted for around 69 per cent of all crude flows through the Strait of Hormuz in 2024. The narrow waterway, which has been brought to a standstill due to the escalating war, accounts for a fifth of all seaborne oil flows.
Here are some of the efforts undertaken by the Gulf’s top buyers.
China
China is the most insulated buyer of Middle Eastern crude as it holds an estimated 1.1 billion to 1.4 billion barrels in reserves, equal to about 140 days of import demand. It has the largest cushion of any buyer.
Beijing had been aggressively stockpiling cheap Russian and Iranian barrels to boost its reserves over the years. China ordered its largest refineries to immediately halt diesel and gasoline exports on March 5, securing domestic supply. It also has the privilege of access to the Strait of Hormuz. Iran has said it will permit only Chinese-flagged vessels to transit the strait because of Beijing's political support. However, tanker owners are being cautious with dozens of Chinese ships still idling in the Gulf.
India
Among all major importers through the strait, India is most acutely exposed. It holds just 25 days of crude reserves and a further 25 days of petroleum products – the smallest cushion of any big buyer. India’s energy crisis prompted the US Treasury to issue a 30-day sanctions waiver allowing Indian refiners to purchase Russian oil rerouted from stranded vessels. Qatar accounted for between 41 per cent and 46 per cent of its LNG imports before the shutdown, according to shipping analytics firm Kpler, creating a supply deficit equal to about 28 per cent of domestic gas consumption.
The energy crisis has triggered a cascade of force majeure declarations. Petronet LNG, India’s largest LNG importer, notified supplier QatarEnergy and domestic buyers that contracted cargoes cannot be fulfilled. India has also begun restricting gas to industrial users to protect household and power sector supply. Mangalore Refinery and Petrochemicals has suspended fuel exports to preserve domestic supply.
South Korea
South Korea, which sources 68 per cent of its crude through Hormuz, faces an immediate LNG crisis. It has 210 days of oil supply in reserve, providing a cushion, but LNG exposure is acute. The government said on Thursday it could run out of gas within nine days. President Lee Jae Myung announced a 100 trillion won ($68.3 billion) financial stabilisation fund and is considering emergency fuel price caps. Seoul also secured an emergency purchase of more than six million barrels of crude from the UAE.
Japan
Japan, which sources 95 per cent of its crude from the Middle East, holds petroleum reserves covering around 254 days of crude imports. Refineries have requested that the government release national stocks. Tokyo holds approximately 350 million barrels of onshore crude inventory, according to Kpler, and is expected to back Monday's G7 release proposal. Japan and the US together account for roughly 700 million barrels of the IEA's total reserve pool.
Other Asian buyers
Bangladesh and Pakistan source the overwhelming majority of their LNG from Qatar and the UAE, leaving them among the most exposed buyers of any size globally.
Bangladesh closed all public and private universities from Monday, bringing forward the Eid Al Fitr holiday period as part of emergency measures to conserve electricity and fuel. It has also imposed daily limits on fuel sales following panic buying, and four of the country’s five state-run fertiliser factories have halted operations.
In Pakistan, the government finalised a national action plan including work-from-home arrangements and distance learning for schools and universities. It also announced weekly petroleum price revisions effective March 8. Islamabad is separately approaching Saudi Arabia to request an alternative crude supply via the Red Sea port of Yanbu. Vietnam, meanwhile, has removed all import tariffs on fuels.
Kyle Fitzgerald contributed to this report
