(March 11): Oil gave up earlier gains and fluctuated on Wednesday after a Wall Street Journal (WSJ) report that the International Energy Agency (IEA) is proposing the largest release of reserves in its history to tackle elevated prices triggered by the Iran war.
The oil release would exceed the 182 million barrels that IEA members put onto the market in 2022 after Russia invaded Ukraine, the WSJ reported. Brent slipped after climbing as much as 3.7% earlier, and was swinging around US$88 ($111.96) a barrel, while West Texas Intermediate (WTI) traded near US$83, continuing a period of extreme market volatility this week.
Countries are expected to decide on the proposal on Wednesday, the newspaper said, citing officials familiar with the matter. The release would be adopted if none object, but one nation’s protests could delay the plan, it said.
The effective halt to shipping through the Strait of Hormuz, which typically handles a fifth of global oil flows, has led to major producers cutting output and driven up energy prices. Tanker traffic has dwindled to a trickle and the market is keenly watching for a resumption of normal trade.
Oil tumbled on Tuesday as the market grappled with rapidly shifting comments from the Trump administration about the Iran war and shipping through Hormuz. Energy Secretary Chris Wright erroneously posted — and then deleted — a message that the US Navy had escorted an oil tanker through the strait near Iran, only for the White House to concede no operation had occurred.
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Traders also had to grapple with a flurry of conflicting social-media messages from US President Donald Trump about mines in the strait. The US leader is facing mounting economic and political pressure over the war, and late Monday he said the conflict would be ending soon, just not this week.
However, US officials on Tuesday signalled military operations were escalating and there was little chance of diplomatic talks, throwing cold water on Trump’s outlook for the conflict. The US president’s frenetic mine posts and Wright’s flub illustrate the scattered messaging on the war.
“It very much feels like a market trading in the fog of war, reacting in real time as events unfold,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Traders continue to get whipsawed by intense price action and extreme volatility in crude, with headlines driving sharp intraday swings.”
See also: Trump and Iran strike defiant tone as oil markets see little relief
The wild fluctuations have seen Brent spike near US$120 a barrel on Monday, and drop as low as US$81.16 on Tuesday. Futures are still higher than pre-war levels.
The conflict in the Middle East, now into its second week, has drawn more than a dozen countries into the fray and has sparked concerns about an inflation crisis. US retail gasoline has jumped, putting additional pressure on Trump.
Saudi Arabia, Iraq, the United Arab Emirates (UAE) and Kuwait have lowered their collective output by as much as 6.7 million barrels a day, or 6% of global output, according to a report from Bloomberg on Tuesday. The biggest oil refinery in the UAE halted operations following a drone strike.
“There would be catastrophic consequences for the world’s oil market the longer the disruption goes on, and the more drastic the consequences for the global economy,” Saudi Aramco chief executive officer Amin Nasser said on Tuesday, his first public comments since the war choked Middle East flows.
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Uploaded by Tham Yek Lee
