MUFG’s Head of Research Derek Halpenny reports that the IEA has proposed a record Oil reserve release of 300–400 million barrels, potentially covering 15–20 days of Strait of Hormuz flows and easing supply constraints for several weeks.

Record reserve plan versus Hormuz disruption

"The Wall Street Journal is reporting that the IEA has proposed the largest ever release of oil reserves which may be an indication that an agreement has been reached amongst G7 for the release of 300-400mn barrels that had been under discussion since the surge in crude oil prices on Monday."

"Given that usually around 20mn barrels of oil are shipped through the Strait of Hormuz per day, the release will equate to fully compensating for the closure of the Strait for between 15-20 days."

"In reality, its longer than that as Saudi has shifted exports to the west coast so this action does help alleviate the supply constraint for a reasonable period of time."

"Indeed for a time that investors have likely been assuming this conflict would last – 3-4 weeks."

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