Oil Prices Rebound as Markets Question Impact of Record Reserve Release

Global oil prices climbed on Wednesday as traders questioned whether a proposed record release of emergency reserves could offset possible supply disruptions linked to the conflict involving the United States, Israel and Iran.

Benchmark Brent Crude futures rose $3.31, or 3.8 percent, to $91.11 a barrel by mid-afternoon in Saudi Arabia. West Texas Intermediate crude gained $3.13, also about 3.8 percent, reaching $86.58 a barrel.

The rebound followed heavy losses earlier in the week. Oil prices had plunged more than 11 percent on Tuesday as markets reacted to the possibility of a large coordinated release of strategic oil reserves aimed at stabilizing energy costs.

The proposed action is expected to be recommended by the International Energy Agency, which is considering releasing around 400 million barrels of crude oil. If approved, it would represent the largest release of emergency reserves in the agency’s history.

The planned volume would be more than double the 182 million barrels released in 2022 after the Russian invasion of Ukraine disrupted global energy markets. Sources familiar with the discussions said the release could take place over at least two months, while Spain’s energy minister indicated participating countries might have up to 90 days to distribute the oil into global markets.

Despite the scale of the proposed move, analysts say the release may only partially offset supply losses if disruptions in the Gulf continue.

In a note to clients, analysts at Goldman Sachs said even a release equivalent to the 2022 level would compensate for only about 12 days of the bank’s estimated disruption of 15.4 million barrels per day in exports from the Gulf region.

SEB analyst Bjarne Schieldrop said market reactions suggest traders remain unconvinced that stockpile releases alone can stabilize prices during the current crisis.

Tensions escalated on Tuesday as US and Israeli forces carried out major airstrikes on Iran, described by the US Department of Defense as among the most intense operations since the conflict began.

At the same time, the United States Central Command reported that US forces had destroyed 16 Iranian vessels suspected of laying naval mines near the critical shipping route of the Strait of Hormuz.

The strategic waterway is one of the world’s most important energy corridors, carrying a large share of global oil exports. Any disruption there can quickly influence international prices.

Meanwhile, infrastructure disruptions have added to supply concerns. State oil company Abu Dhabi National Oil Company halted operations at its Ruwais refinery after a fire broke out at the complex following a drone strike, according to sources familiar with the situation.

Energy consultancy Wood Mackenzie estimates that the conflict may currently be cutting Gulf oil and refined product supplies by around 15 million barrels per day. The firm warned that continued disruptions could push crude prices as high as $150 per barrel.

Analysts at Morgan Stanley also said that even a quick end to the conflict could leave energy markets facing weeks of instability as supply chains recover and transport routes stabilize.

Industry data cited by market sources also indicated that US crude, gasoline and distillate inventories declined last week, reflecting strong demand and adding additional pressure on global supply.