400 million barrels are not enough

The International Energy Agency announced yesterday the largest release of strategic petroleum reserves in its history: 400 million barrels, unanimously approved by its 32 member countries. The United States will contribute 172 million from its Strategic Petroleum Reserve, with deliveries starting next week. Japan, Germany, Austria and the United Kingdom also announced contributions. It is more than double what was released in 2022 after Russia's invasion of Ukraine.

The market heard the announcement and did not flinch. Brent briefly dipped to around $90 but closed back above $100. Since the war began, US crude has risen over 30%. Petrol prices in the United States have climbed more than 50 cents per gallon. Macquarie analysts calculated the release amounts to roughly four days of global production and 16 days of the volume that normally transits the Gulf. "If that doesn't sound like much, it isn't," they said.

IEA chief Fatih Birol himself acknowledged the reserves are a palliative: tanker traffic must resume through the Strait of Hormuz to stabilise flows. JPMorgan was more blunt: policy measures will have limited impact unless safe passage through the strait is assured. Global LNG supply has fallen 20%, forcing Asia and Europe to compete for available cargoes. The IEA was created in 1974, precisely after the Arab oil embargo of 1973 in support of Israel. Fifty-two years on, history rhymes with uncomfortable precision.