Analysis: Historic IEA Reserves Release Faces Hurdles


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- With much of the Middle East's oil trapped at home, the 
West's biggest consuming nations have committed to the largest release ever of 
their emergency reserves. But the action will only mitigate half of the current 
supply deficit, requiring more workarounds by both crude exporters and refiners.

   The International Energy Agency (IEA), which represents 32 oil consuming 
nations, announced Wednesday (3/11) a historic 400 million-bbl reserves release 
from its holding of around 1.2 billion bbl to cushion the supply shortfall 
triggered by the U.S.-Israel war with Iran.

   The Paris-based IEA was founded in 1974 in response to the OPEC oil embargo 
a year before that which caused the first major shock to global oil supplies. 
It has coordinated five stockpile releases prior to this -- one each in 1991, 
2005 and 2011, and twice in 2022.

   The one it has just committed to will dwarf the 182 million bbl released in 
response to Russia's invasion of Ukraine four years ago. The majority would 
come from the U.S. Strategic Petroleum Reserve, which has a maximum drawdown 
capacity of 4.4 million bpd.

   But the relief might not be felt immediately, as the oil takes thirteen days 
to reach the market, according to the U.S. Department of Energy.

   While a major headline figure, the IEA release will be spread over two 
months, supplying 5 to 6.7 million bpd, representing approximately half of the 
currently disrupted flows.

   Simultaneously, Saudi Arabia and the UAE are pivoting exports toward ports 
outside the Persian Gulf, primarily leveraging the Red Sea's Yanbu terminal. 
Though loadings at Yanbu have doubled to over 2 million bpd, operational 
constraints and pipeline capacities limit total diversion to around 4.5 million 
bpd.

   These efforts are critical, as the closure of the Strait of Hormuz -- which 
typically handles 21 million bpd of petroleum liquids -- has forced producers 
to throttle output by 10 million bpd so far, according to IEA estimates. While 
vast commercial and strategic global inventories, currently at a five-year high 
8.2 billion bbl, can provide a significant buffer for domestic refiner intake, 
they cannot offset the prolonged loss of production from other Middle Eastern 
exporters.

   The situation is further complicated by the stranding of 5 million bpd of 
refined products in the Persian Gulf and the suspension of regional refinery 
operations due to damage from Iranian attacks. Consequently, the disruption to 
fuel supply is likely to persist longer and prove more severe than the 
challenge to crude oil flows, as the restoration of both production and 
logistics will likely require weeks once shipping lanes finally reopen.




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