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IEA Nations to Release 60 Million Barrels of Oil

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Member nations of the International Energy Agency (IEA) agreed on Tuesday to release 60 million barrels of oil from their strategic stockpiles to counter fears of a supply shortfall as a result of the war in Ukraine.

The move failed to reassure the market, however, with Brent crude futures breaking above $107 per barrel at one point before settling some 7% higher at $104.97.

One trader told Energy Intelligence that the initiative — only the fourth such coordinated effort in the IEA's history — was "immaterial."

To put it into perspective, global oil consumption was running at around 100 million barrels per day in the final quarter of 2021.

"Global energy security is under threat, putting the world economy at risk during a fragile stage of the recovery," IEA Executive Director Fatih Birol said on Tuesday.

The agency said the release of oil from strategic stocks was meant to "send a unified and strong message to global oil markets that there will be no shortfall in supply."

It also noted that the volume of oil in question represented just 4% of the 1.5 billion bbl held by IEA members in their strategic reserves, which would leave plenty for future releases if they were deemed necessary.

US to Supply Half of Total

The US committed to supply 30 million bbl — half of the total amount — and Energy Secretary Jennifer Granholm said Washington was prepared "to take additional measures if conditions warrant."

Beyond the overall amount, few other details were provided, with an IEA official saying that additional information would be made available in the next few days.

The agency has also committed to helping Ukraine with fuel supplies, with Birol saying that Ukrainian Energy Minister German Galushchenko would be a special guest at an upcoming IEA ministerial meeting.

The IEA noted that Russia is the world's biggest oil exporter, with around 5 million b/d of crude and 2.85 million b/d of products trade. It is also the biggest supplier of natural gas to Europe.

"Energy supply should not be used as a means of political coercion nor as a threat to national and international security," the IEA said.

Steering Clear of Russian Oil

Because of Europe's dependence on Russian energy, EU and US sanctions have not directly targeted that country's oil and gas exports.

Nevertheless, there are signs that European buyers in particular are steering clear of Russian oil.

Russia, meanwhile, has not taken any steps to cut off energy supplies to Europe, and many pundits argue that it would be loath to do so because it needs the revenues that its oil and gas exports generate.

Granholm, who chaired Tuesday's IEA ministerial meeting, said the Ukraine crisis illustrates the need for the US and its allies to shift away from oil.

“Clean energy technologies are available and cost-effective today and offer the surest path towards a world where energy supply cannot be used as a means of political coercion or a threat to national security," she said.

The US had already announced last November that it would release up to 50 million bbl of oil from its Strategic Petroleum Reserve, but that failed to halt the relentless rise in global oil prices.

Opec-Plus

The Opec-plus producer alliance, which includes Russia, held a meeting of its joint technical committee (JTC) on Tuesday, ahead of a ministerial meeting on Wednesday.

The ministers are expected to stick with the policy of gradually increasing joint production in monthly increments of 400,000 b/d on the grounds that current high oil prices reflect geopolitical factors rather than a shortage of supply.

"The price is high because of geopolitical tension, not because of a shortage. Releasing stocks or increasing supply will be pointless. It's like giving Panadol to someone who is terminally ill," one Opec-plus delegate told Energy Intelligence.

There was no explicit discussion of Russia's invasion of Ukraine during the JTC meeting on Tuesday and so far the Mideast Gulf member states have chosen to remain "neutral" and avoid picking sides.

Saudi Arabia in particular is believed to be keen to preserve its relationship with Russia, which forms the foundation of the Opec-plus alliance.

Meanwhile the Kremlin released a statement on Tuesday saying that President Vladimir Putin and the crown prince of Abu Dhabi, Sheikh Mohammed bin Zayed al-Nahyan, had spoken by telephone and discussed cooperation within Opec-plus.

The statement said the situation in Ukraine was also discussed and that Putin had outlined Russia's reasons and objectives for sending troops into that country.

Topics:
Oil Supply, Military Conflict, Security Risk , Sanctions, Ukraine Crisis
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