Oil prices moved lower in early Asian trade following reports that the International Energy Agency (IEA) has proposed the largest emergency release of oil in its history to help offset supply disruptions related to the Iran conflict.
Brent crude futures for May were down 0.5% at $87.37 a barrel, while West Texas Intermediate futures fell 0.4% to $81.78 a barrel as of 20:46 ET (00:46 GMT). Prices swung sharply in the minutes after the report was published, before settling into a downward trend.
The IEA proposal would see member countries consider a release that exceeds the 182 million barrels that were freed from reserves in 2022 at the outset of the Russia-Ukraine conflict. The move is being positioned as an emergency measure to counter increased disruptions after what was described as a near complete closure of the Strait of Hormuz by Iran.
The Strait of Hormuz is a vital shipping channel, handling roughly 20% of the world’s oil supply. The report said a significant IEA release would aim to limit some of the supply interruptions arising from regional tensions, particularly as the U.S.-Israel conflict with Iran has intensified.
Analysts and market participants cautioned, however, that if the strait remains closed for an extended period, the consequences for oil and gas deliveries to multiple parts of Asia could be severe. The report highlighted that while a large coordinated release could alleviate short-term tightness, a prolonged disruption would present more substantial challenges to supply chains.
Recent reports indicated Iran has attacked ships transiting the Strait this week and has also mined the channel. Tehran has reportedly signaled it will permit passage only after U.S. and Israeli attacks on the country cease, according to the reporting.
In addition to the IEA proposal, there were earlier reports that Group of Seven countries are preparing to tap their reserves to address shortages. The U.S. has also said it will temporarily lift certain sanctions on some sales of Russian oil as part of efforts to bolster crude availability.
Market moves reflected the interplay between emergency supply-options being prepared by international actors and the risk that ongoing disruptions in the Strait of Hormuz could create more persistent strain on supply, especially for Asian consumers dependent on shipments through the channel.