The International Energy Agency said on Friday that the 31 member countries had agreed to a new release of emergency oil reserves in what will be a historic, far-reaching effort to calm global markets ravaged by Russia’s invasion of Ukraine.
The day before, the Biden administration announced a six-month release of 180 million barrels from the United States’ strategic reserve. These efforts are aimed at offsetting oil production that is expected to be curbed by sanctions against Russia and buyers shying away from Russian petroleum.
“This morning, more than 30 countries from around the world gathered for an extraordinary meeting and agreed to release tens of millions of additional barrels of oil to the market,” President Biden said at a news conference Friday.
The agency, which is based in Paris, did not say how much oil would be released. He said more details will be forthcoming next week.
The United States and the IEA have been extremely aggressive in their efforts to contain the disruptive impact that the war in Ukraine and the sanctions against Russia are starting to have on the global economy and consumers in the United States faced with rising gasoline prices. to get. Friday’s meeting was led by US Secretary of Energy, Jennifer M. Granholm.
The announcement is only the agency’s fifth emergency release of oil in its 48-year history, and comes just about a month after a release of 63 million barrels. The agency appears to be working closely with the United States under the leadership of its executive director, Fatih Birol, who was recently appointed to a third term. Mr Birol has held this position since 2015.
The IEA warned of the dangers of disruption to global oil markets due to Russia’s disproportionate role as the world’s third largest producer and largest exporter. The agency released a statement saying that the war in Ukraine is “putting significant pressure on global oil markets”. Storage tank farms are at an eight-year low, and the agency said oil producers had “limited ability” to add supply in the near term.
At a meeting on Thursday, the OPEC Plus producer group refused to add more than a modest amount of oil to the market. Two members of the group, Saudi Arabia and the United Arab Emirates, are said to be able to produce significant amounts of additional oil, but have so far refused to do so, blaming the “geopolitical” rather than oil shortages on the volatile prices.
Analysts at Goldman Sachs said in a note to clients that the deluge of oil from strategic reserves would “help the oil market return to equilibrium by 2022” and potentially alleviate the need for “demand destruction” or reduced economic activity. to reconcile consumption with lower necessities.
Brent oil, the international benchmark, fell about 0.25 percent to $104.40 a barrel on Friday. West Texas Intermediate, the US standard, fell nearly 1 percent to $99.40 a barrel.
The war between Russia and Ukraine and the world economy
The analysts also said there were risks associated with the release of reserves, including potential logistical bottlenecks for oil trying to reach refineries and terminals in the United States. The releases could also discourage potential growth in shale oil production in the United States, analysts said.
The fluctuating prices of recent weeks and uncertainties about the outcome of the war in Ukraine, all surrounding a possible deal that could allow Iran to sell more oil, could lead to investment by oil producers being discouraged, the analysts suggested.