Energy ministers from the Group of Seven nations will hold a virtual meeting Tuesday morning to discuss a possible release of oil reserves to address the supply disruption triggered by the Iran war, sources told CNBC.
G7 finance ministers met Monday to discuss a release of reserves but did not make a decision. The G7 members are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The talks between the G7 have been “positive,” the sources said. Any coordinated action on releasing reserves would occur after the energy ministers’ meeting, they said.
The U.S. believes a joint release of 300 million to 400 million barrels, representing 25% to 30% of the 1.2 billion barrels in the reserve, would be appropriate, sources told CNBC.
“We stand ready to take necessary measures, including to support global supply of energy such as stockpile release,” the G7 finance ministers said after their Monday meeting.
Oil prices surged above $100 per barrel at their highs as the critical Strait of Hormuz remains closed due to threats from Iran. It is unclear when the strait may reopen again to traffic.
Prices pulled back Monday on the expectation that a release of oil reserves will occur. U.S. crude was last trading around $95 per barrel while global benchmark Brent was just under $100.
The closure of the strait has triggered the biggest oil supply disruption in history, according to analysis from consulting firm Rapidan. About 20% of the world’s oil consumption is exported through the narrow waterway.
Unlike past shocks, there is no spare capacity to address the disruption because Saudi Arabia and the United Arab Emirates are cut off from the global oil market due to the strait’s closure, Rapidan analysts said.
The U.S. Strategic Petroleum Reserve is not sufficient to offset the supply bottled into the Persian Gulf, the analysts said. The U.S. reserve currently has 415 million barrels, about 58% of its total authorized capacity of 714 million barrels, according to the Department of Energy.
Member states of the International Energy Agency will come under pressure to release their strategic stocks because this is “the only remaining supply response option,” the Rapidan analysts said.
