IEA Releasing 60 Million Oil Barrels Into Market, Price Cools Down But Rises Slightly as Fears of Instability Persists

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The International Energy Agency (IEA) will release 60 million barrels of oil from its member nations into the global marketplace in an effort to cool down prices after the Russian invasion of Ukraine, following which, prices have risen and remain reluctant to lower.

“The @IEA is moving ahead with a collective oil stock release of 120 million barrels (including 60 million barrels contributed by the US as part of its overall draw from its Strategic Petroleum Reserve),” Fatih Birol, executive director of IEA, said in a tweet on Wednesday.

The move by the international agency follows the Biden administration’s announcement last week to release 1 million barrels on average into the market every day for the next six months, which comes to almost 180 million barrels.

“This record release will provide a historic amount of supply to serve as [a] bridge until the end of the year when domestic production ramps up,” said aWhite House Fact Sheet released March 31.

IEA, representing 31 mostly-industrialized economies, will be making the coordinated release for the fifth time in its history, and the second this year. Russia—the second-biggest oil-producing nation—is not part of the collective.

Supply disruptions and sanctions resulting from the Russian war, combined with commercial inventories at their lowest levels since 2014, and scaled-down efforts by major producers like Saudi Arabia to tap more oil have added significant strains on the market and resulted in volatile price hikes.

Since the announcement, Brent has come down from $108.58 on April 5 to trade at $101.15 on April 6, but has since moved up, and is currently trading at $102.35, as of 11:41 p.m. New York.

The worldwide supply will increase by roughly 2 million barrels per day based on IEA’s release. Altogether, the group has about 1.5 billion barrels in strategic reserves.

Epoch Times Photo
A worker rides his bicycle to the BP oil refinery Ruhr Oil in Gelsenkirchen, Germany, on March 28, 2022. (Martin Meissner/AP Photo)

Meanwhile, the Fed’s hawkish stance regarding inflation and market expectations of higher and more frequent rate hikes have contributed to strengthening the U.S. dollar. As most transactions are conducted in the dollar, oil typically moves in the opposite direction of the currency, resulting in lower oil prices.

Analysts have largely downplayed the coordinated release, claiming that the war-time reserves will have a transient effect on the markets and not have any significant effect on prices in the long run.

High inflation rates plaguing the U.S. economy fueled by energy costs have proven to be a vulnerability for the Biden administration ahead of the Nov. 8 congressional elections.

“In addition to the enormous global reserves release, demand destruction and recession are currently the only price-lowering mechanism in a world devoid of inventory buffers,” Stephen Innes, managing director of SPI Asset Management, told Reuters.

Stalled Iranian nuclear talks have also contributed to renewed market jitters after progress was made in the previous week.

Naveen Athrappully

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Naveen Athrappully is a news reporter covering business and world events at The Epoch Times.





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