Oil prices remain well below the peak of almost $120 reached earlier this week, hovering around $90 at the time of writing, ahead of the G7 meeting on Wednesday to discuss the release of the strategic reserves.
Sentiment has seemingly improved following the proposal of the International Energy Agency (IEA) to release a record amount of oil reserves to help offset the global supply shock caused by the Iran war.
The IEA proposal would reportedly exceed the 182 million barrels released in 2022 after Russia’s invasion of Ukraine. The agency’s 32 member countries are expected to vote on the plan on Wednesday after failing to reach a consensus at an initial meeting on Tuesday.
The IEA members will "assess the current security of supply and market conditions to inform a subsequent decision on whether to make emergency stocks of IEA countries available to the market," said IEA Executive Director Fatih Birol.
IEA member countries hold more than 1.2 billion barrels of public emergency oil stocks, along with around 600 million barrels held by the industry under government obligations.
Oil prices surged earlier in the week amid fears that the Iran war would be prolonged, making the current disruption in energy supplies and the consequent damage to the global economy more severe.
Naval mines in the Strait of Hormuz
To add to the current tensions in energy markets, the Islamic Revolutionary Guard Corps (IRGC) announced on Tuesday that it would start setting naval mines in the Strait of Hormuz to further disturb the circulation of ships through the region.
The announcement prompted an immediate response from US President Donald Trump, threatening an escalation of US-Israeli attacks if it were confirmed that the IRGC had indeed begun planting aquatic mines.
A few hours after President Trump's threat, the US Central Command (CENTCOM) released an update announcing that multiple Iranian naval vessels "including 16 minelayers near the Strait of Hormuz" were eliminated by US forces.
The CENTCOM announcement included a video of the strikes.
Currently, it is unclear and difficult to independently verify whether Iranian forces have indeed placed naval mines in the Strait of Hormuz or if the US military successfully intervened and completely blocked Iran's intention and capability of setting the traps.
More importantly, traffic through the Strait of Hormuz remains effectively halted, with analysts at Wood Mackenzie estimating that about 15 million barrels have been removed from the global market.
Fake news from the US Secretary of Energy
To further contribute to the volatility in energy markets, and oil in particular, US Secretary of Energy Chris Wright wrongly claimed in a social media post that the US Navy had successfully escorted a tanker through the Strait of Hormuz.
Oil prices fell more than 17% immediately following Secretary Wright’s post, who promptly deleted it minutes later, sending markets back up to their prior level.
For a brief moment, markets had begun pricing in for a situation where the US was indeed providing added security in the Strait of Hormuz.
Following the incident, the White House Press Secretary Karoline Leavitt clarified that "the US Navy has not escorted a tanker or a vessel at this time”.
