IEA Calls for Use of Oil Reserves When Necessary, OPEC Criticizes Move for Creating Panic

On Friday (June 13) local time, the International Energy Agency (IEA) stated that it was prepared to release emergency oil reserves if the crude oil market faced shortages following Israel's attack on Iran.

This statement drew criticism from its "rival," the Organization of the Petroleum Exporting Countries (OPEC), which claimed that such remarks would only create panic sentiment in the market.

The IEA primarily represents some oil-consuming countries, while OPEC represents major oil-producing countries. In recent years, the two have continued to have disagreements on issues such as global oil demand trends and the pace of energy transition.

Fatih Birol, the Executive Director of the IEA, stated that the current market supply was sufficient, but the agency was ready to take action if necessary. He added that the IEA's oil security system had 1.2 billion barrels of strategic and emergency oil reserves.

In response, Haitham Al Ghais, the Secretary General of OPEC, criticized the IEA for repeatedly emphasizing the need to release emergency oil reserves, an unnecessary move that created false alarms and sparked panic sentiment in the market.

Al Ghais emphasized that there had been no changes in either crude oil supply or market dynamics, so "there was no need to take unnecessary measures."

It is worth mentioning that after the outbreak of the Russia-Ukraine conflict in 2022, the US and its allies coordinated with the IEA to release emergency oil reserves, a move that was also strongly opposed by OPEC at the time.

Reviewing the current incident, according to CCTV News, Israel launched a "pre-emptive strike" on nuclear facilities and military targets inside Iran in the early hours of Friday (June 13).

Influenced by this news, international oil prices surged significantly, with the main Brent crude oil futures contract rising by 7% to $78.53 per barrel at one point, the highest level since January this year.

Shortly before the news was released, the Islamic Republic News Agency of Iran reported that Iranian President Masoud Pezeshkian condemned Israel's attack on Iran that day and stated that Iran would take a legitimate and forceful response.

These statements led market participants to worry that the situation might escalate further, potentially affecting energy infrastructure in Iran and its neighboring countries, and even leading to the blockade of the Strait of Hormuz.

Earlier in the day, JPMorgan Chase wrote in a report that if a larger-scale conflict broke out in the Middle East, leading to the blockade of the Strait of Hormuz, the crude oil market could face severe supply disruptions.

JPMorgan Chase believed that under extreme geopolitical circumstances, international oil prices could nearly double, rising to levels between $120 and $130.

"Oil prices have surged significantly... and future movements will largely depend on whether Iran repeats the 2019 playbook of attacking tankers, pipelines, and critical energy infrastructure," Helima Croft, an analyst at RBC Capital Markets, wrote in a report.

In September 2019, Yemen's Houthi rebels launched a drone attack on Saudi Aramco's oil processing facilities in Abqaiq, disrupting 5.7 million barrels per day of Saudi Arabia's capacity and causing severe market volatility. There are concerns that a similar "Abqaiq incident" could recur.