This is to send “a strong message” to oil markets that there will not be “a shortage in supplies” due to Russia’s invasion.
At an extraordinary meeting of energy ministers, which was presided over by Jennifer Granholm, U.S. Energy Secretary, the IEA board decided to make the decision. The organization also includes Canada, France, Germany, Japan, and the United Kingdom.
Members of the IEA have emergency stocks of 1.5 billion barrels oil. This release is equivalent to 4% of the stockpiles or approximately 2 million barrels per hour for 30 days.
Fatih Birol, executive director of IEA, stated that “the situation in energy markets requires our full attention.” Global energy security is at risk, which puts the world economy at high risk in a fragile phase of recovery.
Russia is the third largest oil producer in the world and plays a significant role on global energy markets. Russia exports 5 million barrels of crude oil per day, which is about 12% of the global oil trade. 60% of its crude oil exports go to Europe, while 20% goes to China.
This decision was made as oil prices rose Tuesday with benchmark crude crude exceeding $100 per barrel, its highest price since 2014. The turmoil in Ukraine has shaken global markets and raised concerns about economic growth due to rising inflation and central bank plans to raise interest rates.
This is only the fourth time that the IEA has conducted a coordinated drawdown in history since 1974, when the reserves were established following the Arab oil embargo.
The U.S. President Joe Biden had announced in November a coordinated release of 50 million barrels oil in coordination to other energy-importing nations. However, the measure had a limited impact on oil prices which have continued rising.
