Oil prices fluctuated on Wednesday following a report indicating that the International Energy Agency has suggested the largest release of oil reserves in its history to counteract supply disruptions caused by the war on Iran. Brent futures saw an increase of 11 cents, marking a rise of 0.13%, reaching $87.91 a barrel as of 0129. U.S. West Texas Intermediate saw an increase of 7 cents, currently trading up 0.08% at $83.52 a barrel. Both contracts saw an immediate decline following the WSJ report, undoing the early gains in WTI. The IEA’s suggested drawdown would surpass the 182 million barrels of oil that IEA member nations released onto the market in two instances in 2022, following Russia’s full-scale invasion of Ukraine, according to the WSJ, referencing officials knowledgeable about the situation. The U.S. and Israel unleashed a barrage of airstrikes on Iran on Tuesday, described by both the Pentagon and Iranian forces as the most intense of the ongoing conflict. The U.S. military has “eliminated” 16 Iranian mine-laying vessels near the Strait of Hormuz on Tuesday, according to the U.S. Central Command, as U.S. President Donald Trump cautioned that any mines laid in the Strait by Iran must be removed ⁠immediately.

Trump has consistently stated that the U.S. is ready to escort tankers through the Strait of Hormuz when needed. However, sources informed that the U.S. Navy has declined requests from the shipping industry for military escorts, citing that the risk of attacks remains too elevated at this time. “We continue to expect crude oil to remain highly volatile, driven by headlines while trading within a wide range between $75ish and $105ish in the sessions ahead,” Tony Sycamore, market analyst, said in a note. Both contracts experienced a significant decline of over 11% on Tuesday, marking the sharpest percentage drop since 2022. This came just a day after Trump forecasted a swift conclusion to the war, following a surge that saw prices peak above $119 a barrel on Monday, the highest level since June 2022. G7 officials have convened virtually to deliberate on the possible release of emergency oil stockpiles aimed at mitigating the impact on the market. French President Emmanuel Macron is set to lead a video call with fellow G7 leaders on Wednesday, focusing on the ramifications of the ongoing conflict in the Middle East on energy and potential strategies to tackle the situation.

Abu Dhabi’s state oil giant ADNOC has halted operations at its Ruwais refinery following a fire at a facility within the complex, which was triggered by a drone strike, according to a source. This incident highlights the ongoing disruptions to energy infrastructure amid the U.S.-Israeli conflict with Iran. Saudi Arabia, recognized as the globe’s largest oil exporter, is reportedly increasing supplies through the Red Sea. However, current levels remain significantly below what is required to offset the decline in flows from the Strait of Hormuz, according to shipping data. The kingdom is banking on the Red Sea port of Yanbu to enhance its exports and prevent significant production cuts, especially as neighboring countries like Iraq, Kuwait, and the United Arab Emirates have already scaled back their output in light of the ongoing U.S.-Israeli conflict with Iran.

Energy consultancy Wood Mackenzie reported that the ongoing war is currently reducing Gulf oil and oil products supply to the market by approximately 15 million barrels per day, potentially driving crude prices up to $150 per barrel. “Even a quick resolution probably implies weeks of disruption for energy markets yet,” Morgan Stanley stated in a note. In a clear indication of rising demand, U.S. crude, gasoline, and distillate inventories experienced a decline last week, according to market sources referencing figures from the American Petroleum Institute released on Tuesday.