"It's 400 million barrels. I repeat, 400 million." The Executive Director of the International Energy Agency, Fatih Birol, emphasized the historical magnitude of the agreement reached unanimously by its 32 members in his press conference. The United States, Japan, Germany, and the main countries in the world, including Spain, are releasing part of their emergency reserves to try to stabilize the market, which has been hit by the Iran crisis. However, it is not considered sufficient so far, signaling Western impotence in the face of a war with energy consequences like the one unleashed on February 28, blocking Hormuz, a strait of just 21 nautical miles through which 20% of the world's oil traffic passes.
According to Birol's own data, this record global effort to calm the market only equates to about 20 days of the closure of the Strait of Hormuz, a short period if, as feared by the markets, the war lasts much longer than this month.
As a result, Brent climbed 4% after the announcement and rose above $90. At the opening on Thursday, it rose more than 7% to hover around $100 per barrel, a level it surpassed in the early hours, moving further away from the $70 range before the attacks by the United States and Israel on Iran, the fourth-largest oil producer in the world with the capacity to close Hormuz, through which 20% of the world's oil and gas transits. Nevertheless, the agreement reached within the IEA, the organization established in 1974, is unprecedented in scale.
400 million barrels represent 20% of the emergency reserves held by IEA member countries. In total, according to official data, member states have 1.2 billion barrels of emergency reserves and require the industry to retain another 600 million. Releasing them to the market doubles the previous largest effort, which took place in 2022 when around 200 million barrels were released to contain prices following the Russian invasion of Ukraine. As Birol pointed out, the current agreement is the sixth reached within the IEA since its establishment in 1974, surpassing not only the two triggered by the Ukraine war but also those caused by Hurricane Katrina, the civil war in Libya, and even the first Gulf War.
"It is the largest release of emergency oil reserves in the history of our institution," emphasized the Turkish official. He justified it "to compensate for the supply loss caused by the effective closure of the Strait of Hormuz" and "to alleviate the immediate impacts of the market disruption." However, he was realistic: "To be clear, the most important factor for the return of stable oil and gas flows is the resumption of transit through the Strait of Hormuz." One of the reasons the agreement did not dazzle the markets is that it did not detail how the reserves would be released. Birol only indicated that each member country would do so at a pace it deems appropriate, but this could significantly limit the scope of the historic measure because if done slowly, the impact of the Hormuz closure on the market will be more intense. Analysts assert that the pace is as important as, if not more important than, the quantity of barrels released.
UNITED STATES, BEHIND THE SCENES
The United States is in the background of the IEA announcement. Donald Trump shows growing concern about the war's impact on fuel prices and also on the fact that Gulf allies are losing a fortune by not being able to export their oil and gas through Hormuz. "What the IEA has announced is reasonable," stated U.S. Interior Secretary, Doug Burgum, on CNBC. "We have a temporary transit problem that we are resolving militarily and diplomatically —and that we can and will resolve—, this is the perfect time to consider releasing part of those reserves to alleviate some pressure on the global price." The U.S. plays a prominent role in the IEA, and the other partners also want to keep it in the organization following Trump's threats to withdraw from such multilateral institutions.
The U.S. holds significant emergency reserves and is a key player in the decision. Its Prime Minister, Senae Takaichi, pushed for unanimity in the decision by announcing her contribution to the agreement first. "Without waiting for an official decision on the release of international reserves in cooperation with the International Energy Agency (IEA), Japan has decided to take the initiative in releasing its reserves starting from the 16th of this month to facilitate supply and demand in the international energy market," Takaichi announced. "Tankers are practically unable to pass through the Strait of Hormuz, and it is expected that crude oil imports to Japan will decrease significantly from the end of this month," she added. Japan has a high energy dependence on the Middle East.
The Spanish Third Vice President, Sara Aagesen, joined the IEA's unanimity and announced at a breakfast organized by Europa Press that Spain would release the equivalent of a little over 12 days of consumption, around 11.5 million barrels according to Ministry estimates. This represents about 13% of the 92 days Spain has accumulated for emergency situations. Aagesen sees no issue as there is no risk of supply shortages and it is necessary to contribute to the international agreement. "We support less tense markets and that other countries, whose tensions go beyond prices, can have a supply response." If Spain had been left out of the IEA agreement, it would have exacerbated tensions with the Trump administration.