Massive Reserve Release Fails to Halt Surging Oil Prices? Research Firm Warns U.S. May Be Out of Options
As the conflict in Iran drives international oil prices higher, the International Energy Agency (IEA) announced on Wednesday an emergency release of 400 million barrels of petroleum reserves to stabilize the market.
However, prominent research firm Wolfe Research argues that while the IEA’s move may cushion the shock to the oil market, it cannot fully resolve the underlying crisis. The firm emphasizes that reopening the Strait of Hormuz remains the most urgent priority.
Market Had Already Priced in the Reserve Release
On Wednesday ET, international oil prices initially dipped following media reports of the IEA’s release plan. However, prices quickly reversed course and continued to climb. Ultimately, Brent crude futures for May delivery rose 5.2% to $92.25 per barrel, while WTI crude futures gained 5.3% to settle at $87.93 per barrel.
Tobin Marcus, an analyst at Wolfe Research, noted in a report: "The market's reaction to this news was muted, as we believe the move was largely priced in as of Monday."
"On Sunday night, crude prices approached the $120 per barrel mark, but plummeted on Monday primarily due to reports that the G7 was preparing a massive release of strategic petroleum reserves," Marcus explained. He added that this speculation—occurring even before President Trump suggested the war was "essentially over"—had already pulled benchmark prices back into the $90 to $100 range.
Limited Impact of the Reserve Release
Wolfe Research contends that the speed and timing of the IEA member states' release are critical to assessing its impact on the oil market. Prior to the conflict in Iran, nearly 20 million barrels of oil were transported through the Strait of Hormuz daily.
"Assuming a total closure of the Strait of Hormuz, the 400-million-barrel release represents roughly 20 days of transit volume through the waterway," Marcus stated. Consequently, Wolfe Research warned that the IEA’s action must not "obviate the necessity of reopening the strait."
Trump May Be Out of Cards
Wolfe Research further suggested that while the scale of this strategic release is historic and can mitigate the war's impact—and a potential easing of sanctions on Russian oil could further reduce pressure—it still cannot offset a long-term closure of the Strait of Hormuz.
"Furthermore, other measures under consideration by the U.S. appear less significant to us, either because President Trump cannot implement them unilaterally (such as a temporary federal gas tax holiday), they are too marginal to matter (such as Jones Act waivers), or they are disruptive and potentially counterproductive (such as an export ban on crude and refined products)," the firm noted.
Following the IEA's announcement, Marcus suggested that the U.S. may have exhausted its most effective tools to combat surging prices. Marcus stated bluntly: "We do not believe there are many more useful arrows left in the quiver after this."