The International Energy Agency has announced the largest emergency oil reserve release in its history, amounting to 400 million barrels and surpassing the 182 million barrels released following Russia's invasion of Ukraine in 2022.
Yet, despite the historic measure, oil prices resumed their upside - a sign that traders had already priced in the unprecedented 400 million barrel drawdown amid days of mounting speculation.
West Texas Intermediate crude - as tracked by the United States Oil Fund (NYSE: USO) - was trading at $86 a barrel by 10:22 a.m. in New York on Wednesday, up from about $85 prior to the statement.
IEA Announces 'The Largest Ever Release' Of Oil Reserve
In a live press conference on Wednesday, IEA Executive Director Dr. Fatih Birol announced that member countries had voted unanimously to act.
"IEA countries have unanimously decided to launch the largest ever release of emergency oil stocks in our agency's history," Birol said.
"IEA countries will be making 400 million barrels of oil available to the market to offset the supply lost through the effective closure of the Strait of Hormuz."
Birol described the scale of the disruption that the release is designed to address. The Strait of Hormuz normally provides a route to market for 15 million barrels per day of crude oil - roughly 25 percent of the world's oil traded by sea - plus an additional 5 million barrels per day of refined products. Since the conflict began, those flows have all but stopped.
"Without sufficient routes to market, and with no more available storage, Middle East oil producers have started to reduce production," Birol said. "We have seen further attacks and damage to energy and energy-related infrastructure. Refinery operations have also been disrupted, with major implications for jet fuel and diesel supplies in particular."
Birol added that the situation in natural gas markets was equally difficult.
"There are few options to replace the missing LNG cargoes from Qatar and the Emirates," he said. "Global energy supply has been reduced by around 20 percent, and market balances coming into this conflict were even tighter than in the case of oil."
He said Asia is the most severely affected region for gas, with higher-income countries competing hard with Europe for available LNG cargoes, while developing economies are simply being forced to ration consumption.
Despite the scale of the action, Birol was direct that reserves alone cannot resolve the crisis.
"This is a major action, aiming to alleviate the immediate impacts of the disruption in markets," he said. "But to be clear - the most important thing for a return to stable flows of oil and gas is the resumption of transit through the Strait of Hormuz."
Why Prices Barely Moved
The muted market response reflects what Goldman Sachs had warned earlier Wednesday: the release, while historic, cannot close the supply gap on its own.
The 400 million barrel drawdown, deployed at the fastest pace ever recorded - approximately 2 to 2.5 million barrels per day - still leaves a net deficit of more than 10 million barrels per day while the Strait remains closed, according to Goldman's estimates.
At that release pace, the announcement amounts to roughly 160 days of drawdown, not a one-time flood of supply.
On Monday, WTI closed 11.9% lower at $83 a barrel - hitting a session low of $76 - after a social media post from a senior U.S. official claimed the Navy had successfully escorted a tanker through the Strait of Hormuz.
Prices then staged a sharp recovery after the White House walked back the statement and the post was deleted, underlining how sensitive the market has become to any signal - accurate or not - about Hormuz transit conditions.
"The uncertainty on duration makes such a big difference," Goldman Sachs analyst Samantha Darth said.
The IEA said it would continue to actively monitor market conditions.