Brent Crude Touches $100: Will the IEA Announce Further Strategic Reserve Releases?

Investing.com - As conflicts between the U.S., Israel, and Iran continue to disrupt oil flows through the Strait of Hormuz, the oil market remains highly volatile, raising a question: Will the International Energy Agency (IEA) release additional emergency reserves if crude prices rise further?

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Recently, tensions have escalated as regional shipping and energy infrastructure have been targeted, causing significant fluctuations in oil prices. Brent crude traded within a wider range, approaching $120 per barrel earlier this week before retreating. Amid recent turmoil, prices have fluctuated between approximately $84 and $117, currently trading near $98.

Market volatility reflects severe disruptions to global oil supplies. Citigroup estimates that production has been shut down by about 6 to 7 million barrels per day due to serious restrictions on flow through the Strait of Hormuz.

This waterway is a critical artery for global oil trade and is currently “effectively closed,” with shipping activity down by as much as 90% due to attacks and security threats, according to Citigroup strategist Eric Lee in a report.

In response, the IEA and its member countries announced the release of a record 400 million barrels from their stocks as emergency reserves. Strategists say that if supply losses remain in the range of approximately 11 to 16 million barrels per day, this amount could cover about four weeks of supply disruptions.

IEA Executive Director Fatih Birol stated in a release, “The challenges we face in the oil market are unprecedented in scale.” He added that member countries responded with “unprecedented collective emergency action.”

Despite the historic release, Citigroup believes that further intervention could be triggered if prices continue to rise.

The strategists wrote, “If the IEA continues to prepare to provide liquidity and does so, we expect this will effectively limit oil prices (Brent crude >$100/barrel could trigger further releases), while India purchases more Russian oil and China reduces stockpiling activities.”

The total stocks held by the IEA and OECD are about 1.8 billion barrels, including approximately 1.25 billion barrels held by governments and about 600 million barrels in industry stocks under obligations.

While the theoretical extraction rate could reach as high as 24 million barrels per day in the short term, historical emergency releases have been much smaller, typically below 2 million barrels per day.

Citigroup now expects Brent crude to trade within the $80 to $100 per barrel range over the next two weeks, higher than previous forecasts of $80 to $90.

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