France, which holds the G7 presidency, said Wednesday that major economies were ready to act to stabilise oil markets as the US-Israeli war with Iran enters its second week and disrupts supply.
Japan and Germany announced plans Wednesday to release strategic reserves, while the Paris-based International Energy Agency (IEA) has asked member countries to prepare a major emergency stock release.
French Economy Minister Roland Lescure told French media the decisions to tap oil reserves were "undoubtedly part of a highly coordinated strategy".
G7 energy ministers signalled they are prepared to step up emergency measures to stabilise markets if the crisis worsens.
“In principle, we support the implementation of proactive measures to address the situation, including the use of strategic reserves,” they said in a statement.
“We agreed to stand ready to take all necessary measures in coordination with IEA members.”
G7 leaders were set to discuss the economic fallout of the conflict during a video conference chaired by President Emmanuel Macron later on Wednesday.
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Japan moves first
Japan said it would release reserves as early as Monday in an effort to ease pressure on global supply.
“Without waiting for a formal decision on coordinated international stock releases with the IEA, Japan has decided to take the lead in easing supply and demand in the international energy market,” Prime Minister Sanae Takaichi said.
Japan relies heavily on oil from the Middle East and Takaichi said the country expects to be "severely impacted" by the conflict.
Germany also said it would contribute after the IEA asked member states to release oil from emergency stockpiles.
Economy and Energy Minister Katherina Reiche said the agency had asked countries to release reserves “amounting to 400 million barrels”.
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Hormuz tensions
Oil markets have swung sharply since the United States and Israel began striking Iran at the end of February. Prices jumped 30 percent on Monday to nearly $120 per barrel before retreating later that day.
Tehran retaliated by attacking targets across the Gulf and effectively shutting down the Strait of Hormuz, a key corridor for global oil shipments.
Lescure said France currently holds about 108 days of oil import reserves. “That means we could stop everything and still have 108 days ahead of us,” he added.
More than 90 days of reserves are held by a public operator, with another 18 days held by private operators that can also be tapped.
“We need to send a very clear message, which is that if we cannot reopen the Strait of Hormuz, we will replace it with other oil that will come from elsewhere and circulate around the world,” Lescure said.
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Temporary relief
The minister said he had summoned fuel distributors to a meeting on Thursday morning to discuss rising prices at petrol stations.
“They themselves told me last week that they have a few ‘black sheep’ – those are their words. I want the black sheep to get back in line,” Lescure said.
Analysts say that even a large emergency release of oil reserves would only have a limited impact.
A 400-million-barrel release would still be small compared with the roughly 45 million barrels consumed every day by IEA countries, Ipek Ozkardeskaya, of the trading platform Swissquote, told the French news agency AFP.
“It would therefore be a temporary fix,” she said, adding that the prospect of a coordinated reserve release had helped keep oil prices in check on Wednesday.
“The Middle East is now pumping less oil – around 6 percent less – in reaction to the Iran war.”
Other countries have taken steps to respond to rising prices.
Bangladesh has deployed the army to guard oil depots, India has tightened controls on natural and cooking gas, and French officials have inspected petrol stations and fined operators accused of inflating prices.
(with newswires)
