Oil Dips After IEA Reports (Another) Global Reserve Release

Oil prices extended their gains this morning with WTI topping $102 – its highest since 2014 – as the Russian invasion of Ukraine continued to raise the specter of major global supply disruption.

“Prices are shooting up the last couple of days because the risk of sanctions really affecting the Russian energy sector” is very high, said Rohan Reddy, a research analyst at Global X Management, a firm that manages $2 billion in energy-related assets.

So policy makers decided they have to do something!

Bloomberg reports that, according to people familiar with the matter, The International Energy Agency (IEA) – which represents key industrialized consumers including Japan and Germany – has agreed to deploy 60 million barrels from stockpiles around the world.

The IEA’s intervention comes after the OPEC+ coalition, which is led by Saudi Arabia and Russia, disregarded encouragement from Biden last year to increase supplies more quickly. The group meets again on March 2 to discuss its production plans for April. Riyadh has signaled that it doesn’t consider markets to be tight enough to speed up the restoration of production.

Bloomberg notes that this is the first time the IEA has made a synchronised release of oil stocks since the Libyan civil war in 2011. There are echoes of that crisis in today’s events: It was Riyadh’s reluctance to open the taps a decade ago to offset the disruption caused by the uprising against dictator Moammar Qaddafi that prompted the agency into action.

So far, oil traders are less than impressed with WTI only ticking down modestly.,..

It is worth bearing in mind just how much impact the release of US SPR has had on WTI crude prices in the last 18 months…

But hey, maybe this time will be different.