Countries will release 60 million barrels of oil amid Russia’s war

The 31 member states of the International Energy Agency on Tuesday agreed to release 60 million barrels of oil from their strategic reserves – half of which comes from the US – “to send a strong message to the oil market” that supply will not be short after Russia invades Ukraine.

The Paris-based IEA’s panel made the decision at an extraordinary meeting of energy ministers chaired by US Energy Secretary Jennifer Granholm. She said in a statement that President Biden had approved a pledge of 30 million barrels and that the United States was ready to “take additional measures” if needed.

“The group’s decision reflects our shared commitment to addressing the significant supply and market disruptions related to President Putin’s war on Ukraine,” Granholm said.

Russia plays a dominant role in the global energy market as the third largest oil producer. The country’s exports of 5 million barrels of crude oil per day account for about 12% of global oil trade. About 60% go to Europe and another 20% go to China.

So far, US and European sanctions have not banned oil or gas exports and have included exceptions for payments for oil and gas. Western leaders are reluctant to restrict Russian oil exports at a time when tight global energy markets and high prices are fueling inflation in advanced economies.

But the invasion still rocked markets around the world. On Tuesday, oil prices spiked, with the US crude benchmark surpassing $106 a barrel – the highest price since 2014.

IEA Executive Director Fatih Birol said: “The energy market situation is very serious and requires our attention. “Global energy security is at stake, putting the world economy at risk during a fragile recovery.”

Last month, the IEA said global oil demand was 100.2 million bpd in the fourth quarter of 2021. Demand is expected to grow to an average of 100.6 million bpd this year, due to Restrictions aimed at limiting the spread of COVID-19 IEA say are being eased.

In addition to the US, other members of the organization include Germany, France, Great Britain, Japan and Canada. IEA members have emergency reserves of 1.5 billion barrels of oil. The release amounted to 4% of the reserve, or about 2 million barrels per day for 30 days.

This is only the fourth time in the IEA’s history that a coordinated drawdown has been carried out since the reserves were established following the Saudi oil embargo in 1974.

From the US point of view, the price of crude oil determines a large part of what motorists pay to refuel their cars. The national average for a gallon of gas is $3.61, which is 26 cents more than a month ago and 90 cents more than a year ago, according to the AAA motor club federation.

In 2021, the US imported about 245 million barrels of crude oil and petroleum products from Russia – up 24% in a year from 2020. Nearly 8% of US imports of crude oil and petroleum products that year from Russia, based on data from the US Department of Energy’s statistical division.

In November, Biden announced the release of 50 million barrels of oil with the coordination of other energy importing countries, but the measure had only a transient effect on oil prices, which have continued to rise.

Stewart Glickman, oil analyst at CFRA Research, said the latest release from SPR would be only partially helpful, as most reserves are light, while the US largely imports heavier grades of oil. from Russia.

“Refiners plan around certain crumb blends, so you can’t always easily swap one out for another,” he said.

Granholm stressed the need to invest in renewable energy as a way to reduce dependence on Russian oil and natural gas.

To that end, Democratic Senator Joe Manchin of West Virginia called on Biden and the oil industry to take immediate action “up to and including a ban on imports of crude oil from Russia.” “.

Manchin, who advocates fossil fuels such as coal and natural gas as being important to his state of energy production, has had time to become energy independent.