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

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News from Cailian Press, March 12 (Editor: Liu Rui) — As the Iran conflict causes 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 ease the shock to the oil market and cannot fully resolve the issue. The immediate priority remains opening the Strait of Hormuz as soon as possible.

Market Has Already Priced in the Reserve 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. By the end of the day, Brent crude futures expiring in May increased by 5.2% to $92.25 per barrel, and WTI crude futures rose by 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 had already been priced in on Monday.”

“On Sunday night, oil prices approached $120 per barrel, but sharply declined on Monday, largely because reports 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 oil price back into the $90 to $100 per barrel range.”

Limited Impact of Reserve Release

Wolfe Research indicated 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, approximately 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 would be equivalent to about 20 days of transportation through that strait.”

Therefore, Wolfe Research warns that this move by the IEA cannot “eliminate the need to reopen the Strait.”

Trump May Have No More Cards to Play

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

“Moreover, other measures considered by the U.S. seem to have limited significance in our view, either because Trump cannot unilaterally implement them (such as temporarily waiving federal gasoline taxes), or because they are too trivial to matter (like exemptions under the Jones Act), or because 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 that the U.S. may no longer have more effective cards to play in the face of soaring oil prices. Marcus straightforwardly stated:

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