International Energy Agency to release record oil reserves to calm markets

The International Energy Agency (IEA) says it has agreed to release a record 400 million barrels of oil from its strategic reserves to help stabilise markets.

The UK Government said it will contribute 13.5 million barrels from its own stockpile for the release.

The conflict in Iran has halted shipments through the Strait of Hormuz and pushed the price of oil and gas sharply higher.

The IEA, which includes the UK, said the release – the largest in the 50-year history of the 32-nation alliance – will account for around a third of its 1.2 billion barrel stockpile held for emergencies.

Members hold a further 600 million barrels of industry stocks under government obligations.

Energy secretary Ed Miliband said: “With this action, the UK is playing our part in working with our international allies to address the disruption in oil markets.

“The UK has strong and diverse energy supplies, and the price cap plays an important role in protecting energy bills until July.

“The way to protect families and businesses in the long run is to get off our dependency on global fossil fuel markets, and on to clean, homegrown power which we control.”

The Government stressed that the resumption of tankers using the Strait of Hormuz is critical and said it will “will continue to work closely with partners to achieve this”.

Brent crude oil prices were up 3.5% on Wednesday afternoon at 90.87 US dollars a barrel, although this remains significantly down from the peak hit on Monday amid concerns over an intensification in the Iran conflict.

Rachel Winter, partner at Killik & Co, said: “The IEA’s decision to release strategic oil reserves on an unprecedented scale is a significant intervention, and markets will take note.

“Whether it succeeds will depend on how long the conflict continues and whether other producers move to fill any supply gap.

“In the short term, we may see some relief at the pump, and oil majors such as BP and Shell, which have benefited from the recent price spike, could give back some of those gains.”