- The IEA agreed on Wednesday to release 400 million barrels of oil from strategic reserves.
- The release is the largest ever, but market pros doubt it will make an impact.
- Some pointed to previous releases of strategic reserves and the minimal relief they provided.
Volatility has battered oil markets in the weeks since the Iran war began, and market pros think a historic plan to calm crude prices is unlikely to work.
Oil prices spiked again on Wednesday, with Brent again hovering above $90 after dipping below the threshold on Tuesday. The move higher comes even as markets digest plans for a historic release of oil reserves intended to calm the market.
The International Energy Agency announced it would release 400 million barrels from strategic reserves to address disruptions from the Iran war, the largest such release ever. The IEA said that "emergency stocks will be made available to the market over a timeframe that is appropriate to the national circumstances of each Member country."
"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," said IEA executive director Fatih Birol.
Prominent voices in markets have raised concerns about the oil reserve plan, noting it isn't likely to make up for the millions of barrels per day that are no longer flowing through the Strait of Hormuz, a critical waterway that handles 20% of the world's oil flows.
"Reserve release only delays solution, and that creates more long term damage to Oil market," former JPMorgan quant chief Marko Kolanovic wrote in a post on X. "More of a favor to Trump than consumer."
Kolanovic added that he thinks the important part of the discussion is that if even one country objects to the release of oil reserves, it could scuttle the plan, which he sees as an indicator that investors should expect more volatility.
Analysts at JPMorgan made a similar argument earlier in the week. In a note on Tuesday, they highlighted possible solutions for calming oil markets, noting that coordinated oil releases wouldn't be an effective solution.
"While helpful, that pace would not materially ease a 16 mbd shortfall and would likely provide only initial relief while pre‑escalation cargoes are still arriving," they said. "Once those shipments clear and new loadings fail to depart, a 1.2 mbd release would be insufficient to counter potential losses of roughly 12 mbd within two weeks."
Longtime Fidelity fund manager and Wall Street veteran George Noble said on Monday that the reserve plan is a historic mistake that would have severe consequences for energy markets.
He highlighted that the US Strategic Petroleum Reserve sits at roughly 411 million barrels, a significant decrease from its previous peak at 727 million barrels. He recalled the last time the US government released oil reserves and the minimal impact it had on crude prices.
"The previous administration drained 180 million barrels in 2022 to fight $90 oil," he noted. "That release bought consumers about 18 cents per gallon of relief. THIS disruption is structurally larger, geographically more dangerous, and has no visible end date."
Daniel Ghali, a senior commodities strategist at TD Securities, shared his take on the plan in an interview on CNBC on Wednesday, describing it as a historic disruption that the market may not be prepared for.
"It's strategically ambiguous," he stated of the SPR release plan. "You have to remember, global strategic petroleum reserves are not homogeneously distributed. Releasing barrels in the US that are actually needed in Asia is ambiguous from an energy securities standpoint."
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