Crude prices are higher after IEA announces historic oil reserve release

Oil prices were higher Wednesday as the market weighed a historic release of emergency reserves from the International Energy Agency.

At 10:09 a.m. ET, global benchmark Brent crude futures were 3.4% higher at $90.77 a barrel, after earlier rising to nearly $93. U.S. crude oil gained 2.8% to trade at $86.01, after hitting a high of nearly $89.

Oil prices are rising after several commercial vessels were attacked off Iran’s coast. Tanker and cargo traffic through the critical of Strait of Hormuz is severely disrupted due to threats from Iran.

To curb this disruption, IEA countries agreed to release 400 million barrels of oil from their emergency reserves, the largest release in history.

“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size,” said IEA executive director Fatih Birol in a statement. “Oil markets are global so the response to major disruptions needs to be global too. Energy security is the founding mandate of the IEA, and I am pleased that IEA Members are showing strong solidarity in taking decisive action together.”

On Tuesday, oil prices fell drastically after a post on U.S. Secretary of Energy Chris Wright’s social media account wrongly stated that the U.S. Navy had escorted a tanker through the Strait of Hormuz.

White House Press Secretary Karoline Leavitt later told reporters the U.S. Navy had “not escorted a tanker or a vessel at this time.”

Vessel attacks continue

Overnight, it was reported that American forces had sunk several Iranian ships, including 16 minelayers, near the Strait of Hormuz.

Wednesday morning also saw other signs of the conflict escalating, as the U.K.’s Maritime Trade Operations — a maritime security authority — said three cargo ships off Iran’s coast had been struck by projectiles. One of the vessels was struck in the Strait of Hormuz, the UKMTO said.

Meanwhile, authorities in Dubai said two drones fell in the vicinity of Dubai International Airport on Wednesday, with four people being injured as a result. The airspace around the city was briefly closed.

“We really think that the critical factor remains the war’s duration, so these releases of the IEA’s stocks really buys us a few days, but in reality, really it all depends on the opening of the Strait of Hormuz,” Sasha Foss, energy market analyst at Marex, told CNBC’s “Europe Early Europe” on Wednesday.

“This conflict needs to end by the end of the week. Otherwise, we’ll see oil prices spike back up over $100,” Foss said.

Other market watchers have warned that a drawn-out conflict between the U.S. and Iran could push oil back above the $100 threshold.

“If tensions de-escalate in the coming weeks, oil prices could retreat … but even in that scenario, it is unlikely prices will return to the $60–$70 range seen earlier this year,” Paul Gooden, head of global natural resources at Ninety One, said in a Tuesday note.

“If the disruption lasts longer, the consequences become more significant. Oil prices could spike further – potentially above $120 or even higher – until higher prices begin to curb demand.”