Oil prices traded mostly flat as markets awaited a decision by the International Energy Agency on whether to release a record volume of emergency oil reserves to ease supply concerns linked to the conflict involving Iran.
Prices remain well below the peak of nearly $120 per barrel reached earlier in the week. At the time of writing, crude oil was hovering around $90 as investors monitored developments ahead of a meeting of Group of Seven leaders scheduled for Wednesday, where the potential use of strategic reserves is expected to be discussed.
Market sentiment improved after reports that the energy watchdog could recommend the largest release of oil reserves in its history. The proposal is expected to exceed the 182 million barrels released in 2022 following Russia’s invasion of Ukraine.
Member states of the International Energy Agency are expected to vote on the plan after failing to reach agreement during an earlier meeting. The agency’s executive director, Fatih Birol, said participating countries would review supply security and current market conditions before deciding whether emergency stockpiles should be made available to global markets.
Countries belonging to the agency collectively hold more than 1.2 billion barrels of public emergency oil reserves. An additional 600 million barrels are stored by industry groups under government requirements, giving authorities significant capacity to respond to supply disruptions.
Oil prices climbed sharply earlier in the week as concerns grew that the ongoing conflict could last longer than expected and further damage energy supplies. Much of the concern has focused on the Strait of Hormuz, a vital shipping route through which a large share of the world’s oil passes.
Tensions escalated after Iran’s Islamic Revolutionary Guard Corps announced plans to begin deploying naval mines in the waterway. The move raised fears that shipping traffic through the strait could face further disruption.
The statement prompted a warning from Donald Trump, who threatened stronger military action if Iranian forces proceeded with the mining operation. Soon after, United States Central Command reported that American forces had destroyed several Iranian vessels, including 16 ships believed to be involved in laying mines near the strategic passage.
Independent confirmation of whether mines were placed in the strait remains unclear. Shipping activity through the route has largely halted, however, removing an estimated 15 million barrels of oil from the global market, according to analysts at Wood Mackenzie.
Volatility in the oil market also increased after Chris Wright, the US energy secretary, posted on social media that the US Navy had successfully escorted a tanker through the Strait of Hormuz. Oil prices dropped more than 17 percent following the message.
The post was later deleted, and markets quickly rebounded. The White House later clarified the situation, with press secretary Karoline Leavitt stating that the US Navy had not escorted any tankers through the waterway.
Investors are now closely watching the upcoming discussions among major economies to see whether a coordinated release of reserves could stabilise global energy markets.
