On 9/3, Reuters, citing a source from the French government, reported that G7 finance ministers would discuss the possibility of releasing emergency oil reserves during a meeting that day. Previously, the Financial Times also reported similar information, stating that the action would be coordinated by the International Energy Agency (IEA).

Ministers and IEA Director Fatih Birol were expected to hold a conference call today to discuss the impact of the current conflict and seek ways to cool oil prices. To date, three countries, including the US, have supported the idea of releasing oil reserves. Previously, while speaking on Air Force One on 7/3, President Trump stated that the US did not yet need to release its strategic reserves.

All 32 IEA members maintain strategic oil reserves to guard against high oil prices. Some US officials believe that releasing a total of 300-400 million barrels of oil is reasonable. This figure represents 25-30% of these countries' total reserves, which amount to about 1,2 billion barrels.

Oil storage tanks at an Idemitsu Kosan plant in Ichihara, Japan, 11/2021. *Photo: Reuters*

This move comes as global crude oil prices have surged over the past week. In the opening trading sessions this week, Brent and WTI oil prices at one point rose by almost 30%, nearing 120 USD – the highest since mid-2022. The reasons include reduced supply from some major oil-producing countries and investor concerns about prolonged shipping disruptions as the conflict in the Middle East expands.

Following this news, prices cooled somewhat. Currently, Brent is at 106 USD per barrel and WTI has fallen to 101 USD. Another reason for the price drop is that oil giant Saudi Aramco (Saudi Arabia) offered spot crude oil through a series of rare auctions.

"However, unless crude oil flows through the Strait of Hormuz resume soon and regional tensions subside, pressure on oil prices will remain significant," commented Vasu Menon, Chief Investment Officer at OCBC (Singapore).

To date, Iraq and Kuwait have reduced oil production due to full storage facilities. Qatar has also limited liquefied natural gas (LNG) production as it cannot be transported out of the Middle East. Analysts predict that the UAE and Saudi Arabia will also soon reduce production if they run out of oil storage space.

The conflict in the Middle East has paralyzed energy flows through the Strait of Hormuz – a vital shipping lane for the global oil market – for over a week. Saudi Arabia, the world's leading oil exporter, is increasing shipments via the Red Sea. However, this volume cannot compensate for the reduction caused by goods unable to pass through Hormuz.

Retail gasoline and oil prices have increased in many countries due to the Middle East conflict. For example, gasoline prices in the US rose by 0,88-1 USD per liter, an 11% increase, while oil rose by 15%. In Laos, gasoline prices increased by 11-15% and oil by 33%. Thailand also saw gasoline price increases of 4-8% and oil by 14%.

Ha Thu (according to Reuters, FT)