The IEA announces the largest strategic oil reserve release in history, but the market quickly realizes: what truly determines oil prices is not &#34;how much reserve there is,&#34; but &#34;how much can be released each day.&#34;
According to CCTV News, the International Energy Agency (IEA) announced on the 11th that 32 member countries have agreed to release 400 million barrels of strategic oil reserves.
In numerical terms, this is the largest collective release action in the history of the IEA. After the Russia-Ukraine conflict in 2022, IEA member countries released a total of approximately 183 million barrels in two instances, and this scale has directly doubled. Reports indicate that multiple countries have disclosed their contributions:
<blockquote>
<ul>
<li>
United States: 172 million barrels
</li>
<li>
Japan: approximately 80 million barrels
</li>
<li>
South Korea: 22.5 million barrels
</li>
<li>
Germany: approximately 19.5 million barrels
</li>
<li>
France: up to 14.5 million barrels
</li>
<li>
United Kingdom: 13.5 million barrels
</li>
</ul>
</blockquote>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3adbe696-5b11-4094-bbb5-b04c72d90941.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3adbe696-5b11-4094-bbb5-b04c72d90941.png"/>
(Image: Reserve volumes of IEA member countries)
However, for the energy market, the truly critical information has yet to be disclosed—such as the release pace, duration, and the ratio of crude oil to refined oil. These details are often more important than the total volume itself.
From the market reaction, it is clear that traders are also waiting for this information. After the announcement, oil prices briefly fell to around $83 but quickly rebounded, with WTI crude oil returning to above $90.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e9214d8e-6ca4-4120-b95b-00963858d833.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e9214d8e-6ca4-4120-b95b-00963858d833.png"/>
<h2>The Real Issue: Not Inventory, but Supply &#34;Flow&#34;</h2>
To understand why the market is indifferent to the release of 400 million barrels, one must clarify the essential difference between &#34;stock&#34; and &#34;flow.&#34; The anchor for pricing in the commodity market is the actual spot supply and demand that occurs daily, rather than static inventory numbers.
The backdrop for the current surge in oil prices is the near-total halt of transportation through the Strait of Hormuz.
This strait accounts for approximately 20% of global oil transportation volume. As the war escalates, a large amount of crude oil from the Persian Gulf cannot be exported normally.
Data from Citigroup and JP Morgan shows that the blockade of the strait has led to a daily actual loss of crude oil supply of up to 11 to 16 million barrels globally. In other words, the global oil market has suddenly lost a supply source close to Saudi production levels
Therefore, the core issue is not whether there is oil globally.
The public strategic reserves of IEA member countries exceed 1.2 billion barrels, with approximately 600 million barrels of corporate inventory under government regulation. From an absolute quantity perspective, inventory is not scarce.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6156f50e-bfc9-4ef4-b9bb-5940781c0c80.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6156f50e-bfc9-4ef4-b9bb-5940781c0c80.png"/>
(As of now, the total strategic oil reserves of the Organisation for Economic Co-operation and Development (OECD) amount to 1.247 billion barrels, including 935 million barrels of crude oil and 312 million barrels of refined oil.)
The real problem is that oil cannot flow from production sites to the market.
A commodity analyst summarized it in one sentence:
“This is a flow issue, not an inventory issue.”
Releasing reserves can increase inventory supply, but it cannot replace the global oil trade that is completed daily via maritime transport.
To put it bluntly, the 400 million barrels released by IEA member countries cannot fill the enormous black hole of 16 million barrels per day if they cannot be converted into daily flow in the market at a sufficiently fast pace.
<h2>The speed of release is the key variable determining oil prices</h2>
In this context, the market's biggest concern becomes: How quickly can these reserves enter the market?
Kpler senior analyst Homayoun Falakshahi bluntly stated: “The devil is in the details, and the key issue is the speed of release.”
Currently, the IEA has not announced a unified release schedule, only stating that each member country will arrange a timetable based on its own situation.
Large commodity traders privately estimate that the actual market entry rate of this batch of reserves is only between 1.2 million and 4 million barrels per day.
Morgan Stanley's commodity market strategy chief Natasha Kaneva's estimate is even more pessimistic: The coordinated G7 actual release rate can only reach a maximum of 1.2 million barrels per day.
If calculated at this speed, even if all 400 million barrels are released, it would take nearly a year.
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<h2>U.S. Strategic Petroleum Reserve: The largest scale, but limitations are also obvious</h2>
In this action, the United States is expected to bear the largest share.
U.S. Energy Secretary Chris Wright stated that the U.S. will release 172 million barrels of strategic petroleum reserves, with the entire release process expected to last about 120 days.
He mentioned in an interview: “This is to buy time for the world during supply disruptions caused by Iran.”
However, the U.S. Strategic Petroleum Reserve (SPR) itself also faces practical limitations.
Currently, the U.S. Strategic Petroleum Reserve is approximately 415 million barrels, only about 60% of its maximum storage capacity. Previously, after the Russia-Ukraine conflict in 2022, the U.S. released 180 million barrels of reserves, resulting in a significant decrease in inventory
In theory, the maximum release capacity of the U.S. SPR is about 4.4 million barrels per day. However, an assessment by the U.S. Department of Energy in 2016 estimated that the actual sustainable release capacity is only 1.4 to 2.1 million barrels per day.
The actual release rate in 2022 did not even exceed 1.1 million barrels per day.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/907e642d-96cc-44eb-b702-b66d40c9b67d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/907e642d-96cc-44eb-b702-b66d40c9b67d.png"/>
<h2>Deadly Time Lag</h2>
Distant water cannot quench nearby fire. In addition to the slow speed, the release of reserves also faces a significant time lag.
From policy implementation to spot circulation, a cumbersome commercial process is required. After the U.S. President issues the release order, the Department of Energy needs about 13 days to bid, award contracts, and begin delivery. Subsequently, crude oil must be transported via pipelines or tankers to refineries and end consumers.
This means that even if it starts immediately, it will take until the end of March for SPR crude oil to truly enter the market and form effective supply. During this period, a daily supply gap of 16 million barrels will continue to accumulate. JP Morgan estimates that by the end of March, the cumulative crude oil deficit caused by geopolitical conflicts will exceed 100 million barrels. A mere 1.2 million barrels of supply per day is like a drop in the bucket.
Even more critically, the blockade effect in the Strait of Hormuz is backfiring upstream. With crude oil unable to be exported, the storage tanks of oil-producing countries along the Persian Gulf are rapidly filling up. Once the &#34;storage bottleneck&#34; reaches its limit, oil-producing countries will be forced to shut down oil wells.
The latest data disclosed by Bloomberg shows that major oil-producing countries such as Saudi Arabia, the UAE, Iraq, and Kuwait have begun to significantly cut production, with a total shutdown of up to 6.7 million barrels per day, accounting for about 6% of global total production. Moreover, as long as the blockade in the strait continues for another day, this number will continue to rise. This directly transforms a logistics transportation issue into a capacity destruction problem.
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<h2>For the Market, More Like a &#34;Stability Signal&#34;</h2>
From an investor's perspective, this IEA action is more like a policy stability signal.
On one hand, it conveys to the market that major consuming countries will jointly intervene in energy prices, attempting to lower risk premiums.
On the other hand, it buys time for the market—waiting for the resumption of shipping in the Strait of Hormuz.
However, if the blockade continues, the release of reserves will be difficult to truly fill the supply-demand gap.
As one energy trader said:
&#34;Strategic reserves can buffer shocks, but cannot replace normal global oil trade.&#34;
Therefore, for the market, the real significance of this record release plan still depends on one question:
When will the Strait of Hormuz resume navigation?

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The IEA announced the release of 400 million barrels of strategic oil reserves, the largest scale in history, with the United States contributing 172 million barrels. However, the market is more concerned about the pace and scale of the release: institutions estimate that the actual global deployment rate may be only about 1.2 million barrels per day, while the supply gap caused by disruptions in the Strait of Hormuz reaches 11 to 16 million barrels per day. At the same time, there is a 13-day delay in the release of U.S. oil reserves and capacity constraints. This release may not effectively address immediate needs

- The International Energy Agency (IEA) announced the largest ever release of 400 million barrels of strategic oil reserves from 32 member countries.  
- However, the effectiveness of this move largely hinges on the release rate and details, which have not been disclosed, as actual market dynamics are driven by daily supply rather than static stock levels.  
- As geopolitical tensions disrupt key transport routes, the ability to quickly convert reserves into market supply is crucial to addressing the substantial daily shortfall in oil availability.

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The devil is in the details! "The largest release of oil reserves in history": not only is the scale not large enough, but the speed is also not fast enough