Oil Rebounds as Market Tests Effectiveness of IEA Reserve Release
Oil prices rose on Wednesday as the market questioned whether the International Energy Agency's (IEA) plan to release record amounts of oil reserves could offset potential supply shocks stemming from the US-Israel conflict with Iran. Brent rose 0.7% to US$88.39 per barrel at 07:27 GMT, while WTI rose 1.2% to US$84.43 per barrel.
These gains followed a more than 11% plunge on Tuesday, reflecting a still highly volatile market. Early in the Asian session, both contracts briefly extended declines before rebounding, with WTI surging about 5% at the open.
According to a Wall Street Journal report citing officials familiar with the discussions, the proposed IEA reserve release would surpass the 182 million barrels released by IEA member states in 2022 during Russia's invasion of Ukraine. Goldman Sachs estimates that such a release would be equivalent to covering about 12 days of potential disruptions to Gulf exports of 15.4 million barrels per day.
On the other side of the conflict, the US and Israel launched the most intense airstrikes of the war on Tuesday, according to the Pentagon and reports from residents on the ground. US Central Command also said it had “eliminated” 16 Iranian minelayers near the Strait of Hormuz, while US President Donald Trump warned that any mines planted there must be removed immediately. Despite Trump’s repeated statements of readiness to escort tankers, Reuters sources said the US Navy rejected the shipping industry’s request for escorts because the risk of attack was deemed too high at this time.
Supply concerns remain prominent. Sources said ADNOC shut its Ruwais refinery after a fire at the complex following a drone attack, marking the latest disruption to energy infrastructure. Shipping data also showed Saudi Arabia was expected to increase supplies via the Red Sea, but still far from the levels needed to replace the decline in flows from Hormuz, amid production cuts by Iraq, Kuwait, and the United Arab Emirates.
Several projections highlight the asymmetric risks to prices if the disruptions persist. Wood Mackenzie estimates the current war is reducing Gulf oil and oil product supplies to the market by about 15 million barrels per day, potentially pushing prices to as high as US$150 per barrel. Morgan Stanley believes that even a quick resolution could leave weeks of disruption for energy markets. In the US, market sources cited API data showing crude oil, gasoline, and distillate inventories fell last week, indicating stronger demand. (alg)
Source: Newsmaker.id
