IEA reaffirms joint response to Strait of Hormuz crisis

Markets disappointed as move seen as accelerating existing releases, not adding new supply

The logo of the International Energy Agency. [Reuters]
The logo of the International Energy Agency. [Reuters]

The International Energy Agency has decided to accelerate the release of 100 million barrels of strategic petroleum reserves — including more than 20 million barrels of diesel — to counter energy supply disruptions and surging diesel prices stemming from the Middle East war. The move follows the IEA's decision in March to authorize the largest coordinated reserve release in its history, and aims to speed up delivery of remaining committed volumes. Analysts say the impact on oil prices may be limited, however, as the decision advances the timeline of previously pledged releases rather than securing additional supply.

According to Reuters, the IEA held a governing board meeting Thursday (local time) involving all 32 member countries and agreed to supply remaining strategic reserves to the market as quickly as possible, including more than 20 million barrels of diesel.

In a statement issued immediately after the meeting, the IEA said its governing board "reaffirmed its commitment to continue implementing the 2026 collective response action decided in March to address the Strait of Hormuz crisis." Member countries "agreed to accelerate the release of remaining volumes for which specific plans are already in place," it added, including the release of more than 20 million barrels of diesel "as quickly as possible."

IEA member countries had agreed in March to release more than 400 million barrels of crude oil and petroleum products from emergency reserves after the war between the United States and Iran sent international energy prices soaring. That decision marked the largest coordinated strategic reserve release ever led by the IEA.

According to the IEA, member countries have so far supplied approximately 330 million barrels to the market. Some members have already released more than the volumes they pledged in March, and others are considering exceeding their original commitments as well.

The global diesel supply shortage is the key driver behind the IEA's push to accelerate reserve releases.

Disruptions to energy supply chains caused by both the Iran war and the Russia-Ukraine war have pushed diesel prices to record highs across multiple markets worldwide.

Diesel is a critical fuel used broadly in freight transport, logistics and industrial operations, and sharp price increases can drive up shipping costs and corporate production expenses, feeding through to broader consumer prices. The inflationary pressure from rising energy prices has become an urgent burden for governments and consumers alike, making expanded diesel supply a pressing policy priority.

IEA member countries accordingly agreed to focus their accelerated reserve releases on diesel — where the supply shortage is most severe — in addition to crude oil.

Markets reacted with disappointment, saying the IEA's decision fell short of expectations. Reuters reported this month that EU member states had been discussing a proposal put forward by France for an additional reserve release.

France's proposal called for IEA member countries to release 50 million barrels of diesel and 50 million barrels of crude oil separately, supplying a combined 100 million barrels to the market.

The IEA agreement, however, did not include a concrete plan for a new release of that scale.

Abhishek Kumar, an analyst at commodities research firm Sparta Commodities, said the IEA's announcement "is a step in the right direction, but falls short of the specifics the market was looking for." He added that the release of more than 20 million barrels of diesel "appears to be more of an acceleration of previously committed volumes rather than genuinely new supply." His comments underscored that while the agreement could help boost diesel supply in the near term, it does not expand the total volume of supply as markets had hoped.

The IEA said some member countries have already exceeded the release volumes agreed upon in March, and others are planning additional releases. Uncertainty remains, however, over the scale of new supply and the specific timing of future releases.


yckim6452@heraldcorp.com