Massive dumping can't stop the surge in oil prices? Research firm: The U.S. may have run out of options.

Caixin March 12 News (Editor Liu Rui) As Iran conflicts cause international oil prices to surge, the International Energy Agency (IEA) announced on Wednesday that it will urgently release 400 million barrels of oil reserves to stabilize prices.

However, well-known research firm Wolfe Research believes that this move should only mitigate the impact on the oil market and cannot fully resolve the issue. The immediate reopening of the Strait of Hormuz remains the top priority.

Market Has Already Priced in the Storage Release News

On Wednesday, Eastern Time, after media reports of the IEA’s oil reserve release plan, international oil prices initially fell but then reversed course and continued to rise. Ultimately, the Brent crude futures expiring in May rose 5.2% intraday to $92.25 per barrel, while WTI crude futures increased 5.3% to $87.93 per barrel.

Tobin Marcus, an analyst at Wolfe Research, stated in a report: “The market’s reaction to this news was not very significant because we believe it was already priced in on Monday.”

“On Sunday night, crude oil prices approached $120 per barrel, but sharply retreated on Monday. This was largely because reports had already indicated that the G7 was preparing for a large-scale release of strategic petroleum reserves.”

Marcus added: “Before Trump hinted that the war was ‘completely over’ and suppressed oil prices, such speculation had already emerged, pulling the benchmark crude price back into the $90 to $100 per barrel range.”

Limited Impact of the Reserve Release

Wolfe Research stated that the speed and timing of the IEA member countries’ oil reserve release are crucial in assessing its impact on the oil market.

Before the Iran conflict erupted, nearly 20 million barrels of oil were transported daily through the Strait of Hormuz.

Marcus said: “Assuming the Strait of Hormuz is completely closed, the 400 million barrels released is roughly equivalent to about 20 days of transportation through that strait.”

Therefore, Wolfe Research reminds that this IEA move cannot “eliminate the need to reopen the strait.”

Trump May Have No More Cards to Play

Wolfe also noted that although the scale of this strategic reserve release is significant and could alleviate some of the market shocks caused by the war, and easing sanctions on Russian oil might also somewhat reduce market pressure, it still cannot eliminate the long-term impact of the Strait of Hormuz remaining closed.

“Moreover, other measures considered by the U.S. seem to have limited significance in our view, possibly because Trump cannot unilaterally implement these measures (such as temporarily waiving federal gasoline taxes), or because these measures are too trivial to matter (such as Jones Act exemptions), or they could be destructive and counterproductive (such as export bans on crude oil and refined products).”

Therefore, after the IEA announced the release of oil reserves, Marcus believes the U.S. may no longer have more effective cards to play in the face of soaring oil prices. Marcus bluntly stated:

“We believe there will be no more useful options after this.”