Oil prices rose Wednesday morning, with U.S. Crude gaining 2.4% to trade at $85.44 a barrel, as markets anticipated a potential historic release of strategic reserves amid escalating tensions stemming from the U.S.-Iran war and disruptions to shipping in the Strait of Hormuz.
The International Energy Agency (IEA) is considering recommending the release of strategic oil stocks exceeding 100 million barrels in the first month, according to Reuters. This potential action follows a meeting of G7 energy ministers in Paris on Tuesday to discuss the conflict’s impact on global energy markets. Several commercial vessels have been attacked off Iran’s coast, severely disrupting tanker and cargo traffic through the Strait of Hormuz, a critical shipping route.
Japan signaled its intention to independently release stockpiled oil as early as Monday, Prime Minister Takaichi Sanae told reporters Wednesday, as reported by Japanese broadcaster NHK. Germany and Austria have likewise pledged to release parts of their oil reserves in response to the IEA’s request for members to release a record 400 million barrels, aiming to calm surging prices.
Global benchmark Brent crude futures were 2% higher, reaching $89.49 a barrel shortly before 7 a.m. ET, after earlier rising to nearly $93. The coordinated response from major economies reflects concerns over energy supply disruptions and the potential for further price spikes. G7 energy ministers, in a statement to Bloomberg, backed “the implementation of proactive measures to address the situation, including the use of strategic reserves.”
The potential release of reserves could involve a wave of selling oil futures contracts, which, in theory, would drive down futures prices. The U.S. Treasury has substantial resources available to fund such an initiative, but would ultimately need to buy back the contracts or deliver the barrels as they expire.
