War with Iran hits Europe's wallet
The International Energy Agency (IEA) has agreed the largest ever release of strategic oil reserves – 400 million barrels – to curb the rise in oil prices caused by the war with Iran. The decision to release the reserves was made unanimously by the IEA’s 32 member countries on March 11.
Even before the official vote, the countries announced in advance their readiness to share their reserves: among them – Germany, Austria and Japan, writes The Insider. The G7 countries account for about 70% of the total volume: the United States intends to provide 172 million barrels from the strategic reserve fund, France – 14.5 million barrels. US President Donald Trump, who previously criticized Biden for such steps, supported the decision and promised to subsequently replenish the reserves.
Brent crude traded above $90 a barrel after the inventory release announcement. Macquarie analysts estimate that the volume released corresponds to about four days of global production, so experts believe that this is not enough to completely eliminate fears of supply disruptions.
According to Mikhail Gonchar, an oil and gas market expert and president of the Strategy XXI Center, the IEA’s actions are standard practice for such situations:
“The agency was created to respond to emergencies in the energy markets. It constantly monitors the situation and gives recommendations during crises. Some of the oil that does not reach the market because of hostilities is compensated from strategic reserves. This helps stabilize the market and may reduce prices slightly, although risks remain. Strategic reserves of the EU countries are designed for at least 90 days – this is March, April, May and part of June”.
Gonchar also noted that the market situation depends on military activity: “The U.S. is destroying Iranian assets in the Persian Gulf and the Strait of Hormuz. Iran’s actions have already decreased, but they have not completely stopped. History shows that even formally suppressed forces like the Houthis continue to make an impact. When dozens of tankers with military escorts pass through the Strait, the market will gradually stabilize, as it did during the Gulf tanker war in the mid-1980s.”
