The oil market sent a clear signal this week: the large-scale release of strategic crude reserves by the United States and its allies falls far short of addressing unprecedented supply disruptions triggered by the Iran conflict. Over 30 countries across Europe, North America, and Northeast Asia have agreed to inject 400 million barrels of oil into the market to curb rising energy prices. The United States is leading the effort, releasing 172 million barrels from its Strategic Petroleum Reserve (SPR), accounting for 43% of the total release coordinated by the International Energy Agency (IEA).
This marks the largest emergency oil stockpile release in the IEA's 50-year history. The agency's mandate is to ensure the energy security of its member nations during global crises. However, this significant intervention has failed to boost market confidence. Since the IEA announced the emergency release on Wednesday, crude oil prices have surged by more than 17%. The international benchmark Brent crude closed above $100 per barrel for the second consecutive session on Friday.
According to Tamas Varga, an analyst at London oil broker PVM, the reason is straightforward: tankers in the Persian Gulf are under attack, the critical Strait of Hormuz is largely closed, and Iran's new Supreme Leader has vowed to continue blocking this vital trade chokepoint. Tom Liles, Senior Vice President of Upstream Research at consultancy Rystad Energy, stated, "Until the Strait reopens, the impact of such policy announcements will be very limited."
Liles noted that pre-conflict, daily oil exports from Saudi Arabia, Iraq, Kuwait, and the UAE totaled approximately 14 million barrels per day. Of this, about 5 to 6 million barrels per day could be exported via pipelines from Saudi Arabia and the UAE to the Red Sea and the Gulf of Oman. This implies that around 9 million barrels per day—roughly 10% of global supply—can only be transported through the Strait of Hormuz, creating a persistent supply bottleneck until navigation resumes. At first glance, the 400 million barrel emergency reserve could cover about 40 days of lost supply.
But Liles indicated the reality is more complex. "The amount of reserves that can be released within a specific period is limited. The 400 million barrels of oil will not flood the market all at once."
The scale of oil supply disruption caused by the conflict far exceeds the daily volume the IEA can release from reserves, Bernstein analysts said in a client note on Thursday. Consequently, the action's impact on oil price trends will be limited. The US plans to release 172 million barrels over 120 days, averaging 1.4 million barrels per day—only 15% of the supply loss caused by the Strait of Hormuz blockade. It will take 13 days from presidential authorization for the oil to reach the market.
The IEA did not specify when other member countries would begin their releases or the exact volumes, stating only that its 32 members would decide individually based on their circumstances. The IEA's last emergency oil release was in response to the Russia-Ukraine conflict. According to data from consultancy Rapidan Energy, member nations reached a peak combined release rate of 1.3 million barrels per day in September 2022. The firm believes the IEA could potentially increase the release rate to nearly 2 million barrels per day. Bernstein analysts commented, "This buys time, but does not solve the crisis."
Liles suggested that oil prices could rise to levels that start to suppress demand before the reserve release fully takes effect. Rystad Energy forecasts that if the conflict continues for two months, Brent crude could reach $110 per barrel in April; a four-month conflict could see prices surge to $135 per barrel by June.
IEA members also face the risk of depleting their reserves. The planned release of 400 million barrels represents 33% of the members' total reserves of 1.2 billion barrels. The US release of 172 million barrels constitutes 41% of its current SPR holding of 415 million barrels. US Energy Secretary Chris Wright stated on Wednesday that the White House plans to replenish more than 200 million barrels beyond this release amount over the next year without burdening taxpayers.
The IEA's action also does not address the issue of 20% of global liquefied natural gas (LNG) exports being unable to reach the market due to the Strait of Hormuz blockade. LNG is natural gas that is cooled to a liquid state for transport via tankers and is used for power generation and heating. Tobin Marcus, Head of US Policy and Politics at Wolfe Research, said the reserve release would partially cushion the oil shock from the conflict. "But it is no substitute for the necessity of reopening the Strait of Hormuz, and we do not expect further assistance after this," he added.
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