As oil prices soared in the sharpest one-day jump since Russia’s invasion of Ukraine last week, more than two dozen countries agreed on Tuesday to release 60 million barrels of oil from their emergency reserves, aiming to send a “strong message” that there will be “no shortfall as a result of Russia’s invasion of Ukraine.”
But the announcement from the International Energy Agency was greeted as a bust by oil traders. Prices just kept climbing, topping $107 at one point before closing above $100 a barrel for a second day.
“The market is just very concerned,” said David Fyfe, chief economist of Argus Media, an energy research firm.
Russia’s increasingly violent war against Ukraine, forcing more than half a million residents to flee, has sparked intense volatility in the energy markets, partly because Russia provides 10 percent of the world’s oil and more than a third of the European Union’s natural gas. Western countries’ powerful economic penalties in response to the fighting have caused the ruble to crater, prompting worries that Russia may retaliate by curbing or cutting off its energy supplies, or that the sanctions may be scaring off buyers.
While the Biden administration and the European Union have not moved to slow or block Russian oil and gas exports, some refineries and traders have stopped buying crude from the country, even shipments being offered at a deep discount. Refiners, shippers, insurers and banks are pulling back because they are afraid of running afoul of sanctions by dealing with Russia.
It is unclear how much Russian oil exports are falling and how long they may remain depressed, analysts said.
Gasoline prices in the United States have risen since the invasion, reaching $3.619, up nearly a dollar from a year ago and raising midterm political worries for President Biden. And a series of announcements on Sunday and Monday by Western oil giants like BP and Shell, which both said that they would leave Russia, may also have added to concerns about Russia’s oil exports.
For traders bidding up the price of oil on Tuesday, the size of the release — 60 million barrels of oil, amounting to about 2 percent of the daily consumption if spread over 30 days — was not ambitious enough. Two million barrels a day is only about a quarter of Russia’s exports.
The decision was made at an emergency teleconference of energy ministers chaired by the U.S. energy secretary, Jennifer Granholm. The International Energy Agency, whose mission includes coordinating emergency releases of reserves, said that the release was the fourth in its 48-year history.
But some analysts said that the release might still gain some traction if it is well executed.
“It is a meaningful volume,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.
Western sanctions have been engineered to allow companies in Europe to continue to buy Russian energy. But Mr. Fyfe said that the array of penalties for companies doing business with Russia meant that “there is a tacit restriction of energy exports out of Russia even if it is not explicit.”
According to the I.E.A., Russia typically exports a total of 7.85 million barrels a day. About 60 percent of that goes to Europe and 20 percent to China, the agency said.
The energy agency, which has 31 members, declined to specify which countries would be contributing how much oil in the release, but it is assumed that the United States would be a large contributor.
A release coordinated by Washington in November did not have a lasting impact on the market. One problem — for that release and this one — is that additional oil comes from a reserve, not increased production, and so the bump up in supplies could eventually be exhausted.
Analysts at Goldman Sachs said in a recent research note that disruptions to Russia supplies could lead oil prices to rise as high as $120 a barrel. Prices that high may be needed to lower demand enough to match reduced supplies.
So far, tankers of oil from Russia are being loaded normally, said Alex Booth, head of research at Kpler, which tracks shipping. These cargoes, however, were probably arranged before the invasion and the announcements of sanctions by many countries that spooked buyers, shippers and banks.
Beyond the agency’s action Tuesday, other potential relief could come from the Organization of the Petroleum Exporting Countries and its allies, which are expected to meet on Wednesday to discuss the oil markets. So far, there is little indication that the group is willing to do more than agree to go ahead with its usual 400,000 barrels a day of additional supply under an agreement reached in July.
Saudi Arabia, the co-leader of the group, called OPEC Plus, has been talking with Biden administration officials about the oil markets, but a deal does not yet seem to have been reached. Discussions are likely to be complicated because Russia is the co-leader of OPEC Plus.
And it is uncertain if there will be enough support at the meeting for an increase in production beyond the 400,000 barrels a day agreed to earlier. The United Arab Emirates, which along with the Saudis would be expected to be a source of additional oil supplies, recently abstained from the U.N. Security Council resolution condemning Russia’s invasion of Ukraine. That decision “underscores the likely unwillingness” of some countries to bolster production at this time, wrote Helima Croft, an analyst at RBC Capital Markets, an investment bank, in a note to clients.
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