(Bloomberg) -- The U.S. and other major economies have agreed on a coordinated release of oil stockpiles after Russia’s invasion of Ukraine pushed crude above $100 a barrel, according to people familiar with the matter.
The International Energy Agency, which represents key industrialized consumers including Japan and Germany, has agreed to deploy 60 million barrels from stockpiles around the world, the people said. That will mark the second release from American crude reserves within a few months as soaring fuel costs become a growing political problem for President Joe Biden.
The U.S. Energy Department declined to comment. The IEA couldn’t immediately be reached for comment.
Crude prices shot above $105 a barrel in London for the first time since 2014 on fears that oil and gas supplies from energy giant Russia could be disrupted, either by the conflict in Ukraine or retaliatory western sanctions. The rally is exacerbating an inflationary surge for energy-consuming nations, threatening the economic recovery and worsening a cost-of-living crisis for millions.
Russia’s aggression has spooked a market already tightened by a vigorous recovery in demand as the pandemic eases, and constraints on supply owing to under-investment and disruptions around the world. Trading giants Vitol Group and Trafigura Ltd. expect triple-digit prices to continue for a prolonged period.
The IEA’s intervention comes after the OPEC+ coalition, which is led by Saudi Arabia and Russia, disregarded encouragement from Biden last year to increase supplies more quickly. The group meets again on March 2 to discuss its production plans for April.
Riyadh has signaled that it doesn’t consider markets to be tight enough to speed up the restoration of production that the Organization of Petroleum Exporting Countries and its partners halted during the pandemic. Many other nations in the 23-member alliance couldn’t increase supplies any faster even if they chose to, owing to lack of investment and instability.
Saudi Arabia and its Gulf neighbors have enough idle reserves to bolster supplies if they chose to. Yet the kingdom has refused to fill in for fellow OPEC+ members who are struggling by tapping its spare capacity, contending that this would violate the spirit of the alliance’s agreement.
Surging gasoline prices are a particular risk for Biden, who faces midterm elections with slipping approval ratings. He already failed to tame fuel costs with release of crude from emergency stocks announced last year. Traders said that initiative was undermined by its limited scope, with most of the barrels being offered on condition of later return.
It’s the first time the IEA has made a synchronised release of oil stocks since the Libyan civil war in 2011. There are echoes of that crisis in today’s events: It was Riyadh’s reluctance to open the taps a decade ago to offset the disruption caused by the uprising against dictator Moammar Qaddafi that prompted the agency into action.
Previous deployments came during the 1991 Gulf War, and the onslaught of hurricanes Rita and Katrina in 2005, making this just the fourth such intervention in the IEA’s five-decade history.
The IEA’s 30 members, drawn from the Organization for Economic Cooperation and Development, include the U.S., Japan, Germany and France.
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