Oil: Shipping risks and IEA supply plans – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes that crude Oil prices are firmer as markets focus on security of shipping through the Strait of Hormuz. The International Energy Agency is considering releasing emergency reserves, which could exceed the 2022 drawdown, but BBH warns this would only be a short-lived remedy while the Strait remains largely shut, keeping energy markets sensitive to further disruption headlines.

IEA reserves offset but cannot replace flows

"USD and crude oil prices are firmer while stocks and bonds are under renewed downside pressure. The International Energy Agency (IEA) is looking to bring additional crude oil supply to the market to contain a spike in energy prices. IEA Member countries currently hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation."

"The proposed release could exceed the record 182 million barrels deployed during the 2022 Russia invasion of Ukraine."

"However, as long as the Strait of Hormuz remains all but shut, tapping IEA emergency oil reserves would only offer a short-lived remedy."

"15 million barrels per day, nearly 34% global crude oil trade, transits the Strait."

"However, it would not take much for fears to flare up again."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)