The devil is in the details! "The largest-ever crude oil reserve release": not only is the scale insufficient, but the speed also can't pick up.

IEA announces the largest strategic oil reserve release in history, but the market quickly realizes: what truly determines oil prices is not “how much is stored,” but “how much can be released daily.”

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.

From a numerical perspective, this is the largest collective release in IEA history. After the Russia-Ukraine conflict in 2022, IEA member countries released a total of about 183 million barrels twice, and this time the scale has doubled directly. Reports indicate that many countries have already disclosed their contributions:

• United States: 172 million barrels

• Japan: about 80 million barrels

• South Korea: 22.5 million barrels

• Germany: about 19.5 million barrels

• France: up to 14.5 million barrels

• United Kingdom: 13.5 million barrels

(图：IEA member countries’ reserve amounts)

But for energy markets, the really critical information has not yet been disclosed — including the release pace, duration, and the ratio of crude oil to refined products. These details are often more important than the total volume itself.

From market reactions, traders are clearly waiting for this information. After the announcement, oil prices briefly fell back to around $83 but quickly rebounded, with WTI crude oil returning to above $90.

The real issue: not inventory, but “flow” of supply

To understand why the market remains indifferent to the release of 400 million barrels, it’s essential to distinguish the fundamental difference between “stock” and “flow.” The pricing anchor in commodity markets is the actual daily physical supply and demand, not static inventory numbers.

The current surge in oil prices is driven by the almost halt of shipping through the Strait of Hormuz.

This strait accounts for about 20% of global oil transportation. As the conflict escalates, a large amount of crude oil from the Persian Gulf cannot be shipped normally.

Data from Citigroup and JPMorgan Chase show that the blockade of the strait causes a daily actual loss of 11 to 16 million barrels of oil supply globally. In other words, the global oil market has suddenly lost a supply source roughly equivalent to Saudi Arabia’s production.

Therefore, the core issue is not whether the world “has oil,” but whether it can get it to market.

IEA member countries’ public strategic reserves exceed 1.2 billion barrels, with an additional approximately 600 million barrels of corporate inventories under government regulation. In absolute terms, inventories are not scarce.

（As of now, the total strategic petroleum reserves of the Organization 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 products）

The real problem is crude oil cannot flow from production sites to markets.

A commodities analyst summarized it in one sentence:

“This is a flow problem, not a stock problem.”

Releasing reserves can increase inventory supply, but it cannot replace the global oil trade completed daily via shipping.

Simply put, if the 400 million barrels released by IEA member countries cannot be converted into enough daily flow in the market quickly enough, it will not fill the huge 16 million barrel daily gap.

Release speed is the key variable influencing oil prices

In this context, the most pressing question for the market becomes: How quickly can these reserves enter the market?

Homayoun Falakshahi, senior analyst at Kpler, bluntly states: “The devil is in the details; the key issue is the release speed.”

Currently, the IEA has not announced a unified release pace, only stating that each member country will schedule according to their own circumstances.

Private estimates from major commodity traders suggest that the actual market entry rate of this reserve is only between 1.2 million and 4 million barrels per day.

JPMorgan Chase’s commodities strategist Natasha Kaneva’s estimate is even more pessimistic: The coordinated release rate of the G7 can only reach a maximum of 1.2 million barrels per day.

At this rate, even releasing the full 400 million barrels would take nearly a year.

US Strategic Petroleum Reserve: Largest size but also clear limitations

In this operation, the US is expected to bear the largest share.

US Energy Secretary Chris Wray stated that the US will release 172 million barrels from the Strategic Petroleum Reserve, with the entire process expected to last about 120 days.

He said in an interview: “This is to buy time during the Iran supply disruption.”

However, the US SPR itself faces practical limitations.

Currently, the US Strategic Petroleum Reserve holds about 415 million barrels, only about 60% of its maximum capacity. After releasing 180 million barrels following the Russia-Ukraine conflict in 2022, inventories have significantly decreased.

Theoretically, the maximum sustainable release capacity of the US SPR is about 4.4 million barrels per day. But a 2016 assessment by the Department of Energy suggests that actual sustainable release capacity is only between 1.4 and 2.1 million barrels per day.

In 2022, the actual release rate even did not exceed 1.1 million barrels per day.

The deadly time lag

Remote solutions cannot solve immediate problems. Besides the slow pace, reserve releases also face significant time delays.

From policy implementation to actual spot market circulation, a complex commercial process is required. After the US president issues the release order, the Department of Energy needs about 13 days for bidding, awarding, and starting deliveries. Then, crude oil must be transported via pipelines or tankers to refineries and end-users.

This means that even if the release is initiated immediately, the crude oil from the SPR will only enter the market effectively around the end of March. During this period, the daily supply gap of 16 million barrels will continue to accumulate. JPMorgan estimates that by the end of March, the cumulative oil deficit caused by the geopolitical conflict will exceed 100 million barrels. The 1.2 million barrels per day replenishment is like a drop in the bucket.

More critically, the blockade of the Strait of Hormuz is causing upstream repercussions. Crude oil cannot be shipped out, and storage tanks along the Persian Gulf are filling rapidly. Once storage reaches capacity, oil-producing countries will be forced to shut down wells.

Bloomberg reports that major producers like Saudi Arabia, UAE, Iraq, and Kuwait have already begun significant production cuts, totaling about 6.7 million barrels per day, roughly 6% of global output. And as long as the strait remains blocked, this number will continue to rise. This transforms a logistical transportation issue into a capacity destruction problem.

Market signals: more about stability

From an investor perspective, this IEA action appears more as a policy stability signal.

On one hand, it shows that major consuming countries are willing to intervene jointly to influence energy prices, attempting to lower risk premiums.

On the other hand, it buys time for the market — waiting for the Strait of Hormuz shipping to resume.

But if the blockade persists, reserve releases will struggle to truly bridge the supply-demand gap.

As one energy trader put it:

“Strategic reserves can buffer shocks but cannot replace normal global oil trade.”

Therefore, the true significance of this record release plan for the market still hinges on one question:

When will the Strait of Hormuz reopen?

Risk warning and disclaimer

Market risks exist; invest cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Investment is at your own risk.