In a market comment sent to Rigzone on Thursday, Aaron Hill, Chief Market Analyst at FP Markets, highlighted that the oil market “shrug[ged]… off [the] International Energy Agency reserve release” announcement.
“Threats to the energy structure in the Middle East have kept oil prices bid,” Hill said.
“Brent Crude has retested $100, with WTI oil touching highs of $96. This is despite the IEA making headlines, underscoring a coordinated release of an eye-popping 400 million barrels from member-nation strategic reserves,” he added.
“However, considering that the Strait of Hormuz handles approximately 20 percent of global seaborne oil flows, about 20 million barrels per day, this offers under three weeks’ worth of supply, assuming the Strait keeps its doors closed,” he continued.
In a release posted on its website on Wednesday, the IEA said the 32 member countries of the organization unanimously agreed to make 400 million barrels of oil from their emergency reserves available to the market “to address disruptions in oil markets stemming from the war in the Middle East”.
“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA member countries have responded with an emergency collective action of unprecedented size,” IEA Executive Director Fatih Birol said in that release.
“Oil markets are global so the response to major disruptions needs to be global too. Energy security is the founding mandate of the IEA, and I am pleased that IEA members are showing strong solidarity in taking decisive action together,” he added.
The IEA stated in the release that the emergency stocks will be made available to the market over a timeframe that is appropriate to the national circumstances of each member country and added that they will be supplemented by additional emergency measures by some countries.
“The IEA Secretariat will provide further details of how this collective action will be implemented in due course,” the IEA said.
“It will also continue to closely monitor global oil and gas markets and to provide recommendations to member governments, as needed,” it added.
The IEA noted in its release that the conflict in the Middle East that began on February 28 has impeded oil flows through the Strait of Hormuz, “with export volumes of crude and refined products currently at less than 10 percent of pre-conflict levels”.
“This is forcing operators across the region to shut in or curtail a substantial amount of production,” the IEA said.
In a market update sent to Rigzone on Thursday, Rystad Energy warned that, as the Strait of Hormuz remains closed in the wake of the U.S.-Iran military escalation, Gulf countries’ oil inventory levels are reaching maximum capacity.
Rystad outlined in the update that this poses “serious challenges for regionally based refiners”.
In the update, India-based Pankaj Srivastava, Senior Vice President, Commodity Markets – Oil at Rystad Energy, highlighted that, “with crude supply increasingly stranded in the Gulf, refiners may soon be forced to adjust operations, curtailing runs as product exports stall and directing output solely to domestic markets”.
Srivastava noted that three “key factors” will determine the resilience of refining systems across the Gulf.
“Bypassing the strait through alternate export routes, the balance of domestic product demand and refining capacity, and product exports as a ratio of current refinery runs,” Srivastava added.
“Production shut-ins and refining cuts will likely continue across the region as the war rages on, severely threatening two million barrels per day of global oil supply if the strait remains impassable for the next six weeks,” the Rystad representative warned.
In the update, Rystad outlined that its base case market assessment, which was published two weeks before the conflict began, has been materially altered.
“Under the pre-war scenario, we had expected Brent to average $60 per barrel in 2026, as the market faced a substantial surplus of 2.6 million barrels per day,” Rystad pointed out in the update.
Ole Hansen, Saxo Bank A/S Head of Commodity Strategy, warned in an analysis posted on Saxo’s website on Tuesday that the oil market “remains highly volatile as geopolitical headlines collide with the physical reality of disrupted energy flows from the Persian Gulf”.
“The Strait of Hormuz represents the most serious threat to global energy supply since the 1970s, with close to one-fifth of global oil consumption moving through the chokepoint,” he highlighted in the analysis.
“Diesel, jet fuel and LNG prices have reacted the most as the disruption directly impacts refining margins and global gas flows,” he added.
In the analysis, Hansen said Brent crude remains caught between two scenarios; “renewed supply disruption pushing prices above $100, or credible de-escalation sending prices back toward $80”.
“Oil prices remain caught in a wide and unstable range as markets attempt to navigate one of the most serious threats to global energy supply in decades,” Hansen warned in the analysis.
“Monday’s sharp reversal underlined how quickly sentiment can swing, but it did little to remove the underlying supply risks that continue to dominate the outlook,” he added.
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