Oil Fluctuates as IEA Proposes Record Withdrawals from Reserves

SadaNews - Oil gave up its previous gains and its prices fluctuated around the $87 per barrel mark, following a report by the "Wall Street Journal" which indicated that the "International Energy Agency" is proposing the largest drawdown from reserves in its history to combat rising prices caused by the war in Iran.

The report mentioned that the proposed amount would exceed 182 million barrels of oil, which is the volume pumped by member countries of the agency into the market in 2022 following the Russian war on Ukraine.

Brent crude fell after having risen by as much as 3.7% earlier, while West Texas Intermediate fluctuated around $83, continuing a period of sharp market volatility this week during which prices exceeded $100 on Monday.

The actual halt of shipping through the Strait of Hormuz, which normally carries about one-fifth of global oil flows, has prompted major producers to cut output, pushing energy prices such as crude oil and natural gas to rise.

The movement of oil tankers has also declined to very minimal levels, as the market closely monitors any potential return to normal trading activity.

The "Wall Street Journal" reported, citing officials familiar with the matter, that countries are expected to make their decision regarding the proposal on Wednesday. It added that the decision will be adopted in the absence of any objections; however, any objection from any country could lead to delays in the plan.

Earlier this week, the "Group of Seven" requested the agency prepare scenarios for releasing the strategic oil reserves.

Sharo Chanana, chief investment strategist at "Saxo Markets" in Singapore, stated that the agency's release of these reserves "represents both a safety valve and a warning signal at the same time."

She added that the decision "could add temporary supplies and alleviate panic, but it also indicates that the risk of disruption is serious enough to warrant emergency action."

Conflicting Messages from the Trump Administration

Oil prices dropped on Tuesday as the market dealt with rapidly changing statements from the administration of U.S. President Donald Trump regarding the war in Iran and shipping through the vital Strait of Hormuz.

Energy Secretary Chris Wright mistakenly published a message indicating that the U.S. Navy escorted an oil tanker through the strait near Iran before deleting it later, after the White House later acknowledged that no such operation had taken place.

The traders also had to contend with a flood of conflicting messages on social media from President Donald Trump regarding mines in the strait.

The American president faces increasing economic and political pressures due to the war, and he stated late Monday that the conflict would end soon, but not this week.

However, American officials indicated on Tuesday that military operations are escalating, and the chances of diplomatic talks are slim, casting doubt on Trump's predictions regarding the end of the conflict.

Rebecca Babin, a prominent energy trader at "CIBC Private Wealth Group", said: "It seems that the market is largely trading in the fog of war, reacting in real-time to developing events rather than moving in an orderly manner."

She added: "Traders are still experiencing sharp fluctuations due to strong price movements and extreme volatility in crude oil, with headlines driving sharp daily moves within the session."

Sharp Fluctuations in Oil Prices Since the Outbreak of War

The effects of the conflict in the Middle East, which has entered its second week, have affected more than 12 countries and raised concerns about an inflation crisis. Retail gasoline prices in the United States have risen, adding pressure on Trump.

Saudi Arabia, Iraq, the UAE, and Kuwait have reduced their total production by up to 6.7 million barrels per day, or about 6% of global production, according to a report published by "Bloomberg" on Tuesday. The largest oil refinery in the UAE also halted operations after being struck by a drone.

Amin Nasser, CEO of Saudi Aramco, said in his first public comments since the war disrupted oil flows in the Middle East, "There will be catastrophic consequences for the global oil market the longer this disruption lasts, and the repercussions for the global economy will be even more severe."

In the latest transactions, Brent futures for delivery in May fell by 0.8% to $87.13 per barrel at 1:10 PM in Singapore, while West Texas Intermediate futures fell by 0.1% to trade at $83.33 per barrel.