A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011.Jo Yong hak/Reuters
The International Energy Agency said Friday that its 31 member nations had agreed to a new release of emergency oil reserves in what is turning into a historic, wide-reaching effort to calm global markets roiled by Russia’s invasion of Ukraine.
A day earlier, the Biden administration announced a 180-million-barrel release over six months from the strategic reserve held by the United States. These efforts are aimed at compensating for the oil production expected to be curbed by sanctions on Russia and buyers who are shying away from Russian petroleum.
“This morning, over 30 countries from across the world convened in an extraordinary meeting and agreed to the release of tens of millions of additional barrels of oil onto the market,” President Joe Biden said at a news conference Friday.
The agency, which is based in Paris, did not say how much oil would be released. It said more details will come next week.
The United States and the IEA have been unusually aggressive in trying to control the disruptive impact that the war in Ukraine and the sanctions on Russia have begun to have on the global economy and consumers in the United States facing escalating gasoline prices. Friday’s meeting was led by U.S. Energy Secretary Jennifer Granholm.
The announcement is the agency’s fifth emergency release of oil in its 48-year history and comes only about a month after a release of 63 million barrels. The agency appears to be working closely with the United States under its executive director, Fatih Birol, who was recently appointed to a third term. Birol has held the post since 2015.
The IEA warned about the dangers of disruption to global oil markets posed by the outsize role that Russia plays as the world’s third-largest producer and largest exporter. The agency issued a statement saying the war in Ukraine is putting “significant strains on global oil markets.” Storage tank farms are at eight-year lows, and the agency said oil producers had a “limited ability” to add supply in the short term.
At a meeting Thursday, the OPEC+ group of producers declined 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 believed to have the ability to produce substantial amounts of additional oil but have so far declined to do so, blaming “geopolitics” rather than shortfalls of oil for volatile prices.
Analysts at Goldman Sachs said in a note to clients that the deluge of oil from the strategic reserves would “help the oil market rebalancing in 2022” and potentially ease the need for “demand destruction” or reduced economic activity to bring consumption in line with lower supplies.
Brent crude, the international bench mark, fell about 0.25% Friday to $104.40 a barrel. West Texas Intermediate, the U.S. standard, fell nearly 1% to $99.40 a barrel.
The analysts also said there were risks associated with the reserve releases, including potential logistical bottlenecks for oil that is trying to reach refineries and terminals in the United States. The releases might also discourage potential growth in shale oil production in the United States, the analysts said.
The swinging prices of recent weeks and uncertainties over the outcome of the war in Ukraine, all surrounding a potential deal that might allow Iran to sell more oil, may combine to discourage investments by oil producers, the analysts suggested.
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