IEA is releasing emergency stock to ease oil price shock

As crude oil prices soar amid severe supply concerns, the 31 member-countries of the governing board of the International Energy Agency (IEA) have agreed to release 60 million barrels of oil from their emergency reserves.

In a statement, IEA said the decision has been taken to send a unified and strong message to global oil markets that there will be no shortfall in supplies as a result of Russia’s invasion of Ukraine.

The move would come as a major relief for countries heavily dependent on imports to meet their energy needs, including India. India, the world’s third largest oil importer, is dependent on imports to meet 85% of oil needs and 55% of natural gas requirements.

India is among the eight association countries of IEA, along with China, Brazil and South Africa.

On Thursday, the IEA Secretariat will release a 10-point plan on how European countries can reduce their reliance on Russian gas supplies by next winter.

Tuesday’s extraordinary governing board meeting, held at the ministerial level, was chaired by US secretary of energy Jennifer Granholm.

“During today’s meeting, ministers expressed solidarity with the people of Ukraine and their democratically elected government in the face of Russia’s appalling and unprovoked violation of Ukraine’s sovereignty and territorial integrity,” the statement said.

IEA’s 31 member-countries include the US, UK, Canada, Australia and Japan.

The IEA ministers noted with concern the energy security impact of the actions by Russia, and voiced support for sanctions imposed by the West. They observed that the Russian invasion comes against the backdrop of already tight global oil markets, heightened price volatility, commercial inventories that are at their lowest since 2014, and a limited ability of producers to provide additional supply in the short term.

“It is heartening to see how quickly the global community has united to condemn Russia’s actions and respond decisively,” said IEA executive director Fatih Birol.

“I am also happy that our member countries committed to do their utmost to support Ukraine in terms of fuel supply. At the invitation of the governing board, I am also looking forward to welcoming Ukraine energy minister Galushchenko as a special guest to our forthcoming ministerial meeting later this month,” the executive director added.

IEA members hold emergency stockpiles of 1.5 billion barrels. The announcement of an initial release of 60 million barrels, or 4% of those stockpiles, is equivalent to 2 million barrels a day for 30 days.

The coordinated drawdown is the fourth in the history of the IEA, which was created in 1974. Previous collective actions were taken in 2011, 2005 and 1991.

Russia plays a major in the global energy markets as it is the world’s third largest oil producer and the largest exporter. Its exports of about 5 million barrels a day of crude represent roughly 12% of global trade. Around 60% of Russia’s oil exports go to Europe and another 20% to China, IEA said. During the meeting on Tuesday, the ministers resolved that energy supply should not be used as a means of political coercion or as a threat to national and international security.

The IEA secretariat will continue to closely monitor global oil and gas markets and to provide recommendations to the governing board, including possible additional emergency oil stock draws, as needed, the statement said.