Oil prices jump despite strategic reserve release

A record release of oil from strategic reserves by the International Energy Agency (IEA) nations failed to ease concerns about the impact of the Middle East war, with crude prices pushing further higher and stocks sliding on Wednesday. The move to release oil stocks came as Iran said it was ready for a long war […]

A record release of oil from strategic reserves by the International Energy Agency (IEA) nations failed to ease concerns about the impact of the Middle East war, with crude prices pushing further higher and stocks sliding on Wednesday.

The move to release oil stocks came as Iran said it was ready for a long war of attrition that would “destroy” the world economy, after firing on two commercial ships and threatening any vessels from the US or its allies.

The IEA announced its member countries would unlock 400 million barrels of oil from their reserves to ease the impact of a lack of supplies transiting through the Strait of Hormuz.

Tehran has retaliated to US and Israeli attacks that began on February 28 by attacking targets across the oil-rich Gulf and effectively shutting down the crucial Strait of Hormuz, through which nearly 20 per cent of the world’s oil usually transits to world markets.

Despite the IEA’s announcement, oil prices added to gains.

While it may be a record reserves release, it still only replaces part of the lost supplies, noted analyst Helge Andre Martinsen at DNB Carnegie.

He estimated that releases from strategic reserves could total 1.75 million barrels per day, while lost supply is approximately 11 million barrels per day of crude and around four million barrels per day of oil products.

“Hence, it will help, but it won’t make a massive difference for the very short-term global oil balance,” he said.

Equity markets were not reassured either. Wall Street was mostly lower in afternoon trading and European markets closed in the red.

“With the IEA’s record oil reserves release unable to push prices lower today [Wednesday], this is keeping risk appetite downbeat, with stock markets struggling and currencies of oil-importing regions lower,” said Forex.com analyst Fawad Razaqzada

Fears that the conflict could drag on – choking off energy supplies – sent both main crude contracts soaring on Monday to within a whisker of $120 a barrel, the highest since 2022. Natural gas prices also rocketed.

Prices dropped on Tuesday after US President Donald Trump said the war was “going to be ended soon”, before turning higher again.

“Markets are likely to grow increasingly fearful over the long-term implications with each day that passes,” said Joshua Mahony, chief market analyst at Scope Markets.

Forex.com’s Razaqzada said the markets were paying attention to Iran’s warnings to disrupt oil flows and a reported shift to continued attacks from retaliatory strikes.

Such a move “suggests the conflict could intensify rather than cool”, he said.