Brent Breaks US$100, Market Hesitates Whether Oil Reserves Can Dampen Shock

Illustration of an offshore oil rig. (Antara)

JAKARTA - World oil prices have jumped sharply amid concerns about supply disruptions due to the war in the Middle East. CNBC, Thursday, March 12, reported that Brent crude oil broke through US$100 per barrel, while West Texas Intermediate or WTI rose 8.8 percent to US$95 per barrel.

The increase occurred even though the International Energy Agency or IEA announced the largest emergency reserve release in history. A total of 32 IEA member countries will release 400 million barrels of oil from emergency reserves. The United States also stated that it would release 172 million barrels from its strategic oil reserves.

US Energy Secretary Chris Wright said shipments could begin next week and take about 120 days to complete. But the market has not seen that as enough to close the supply gap, especially if oil flows through the Strait of Hormuz remain disrupted.

CNBC wrote, market doubts arose because the route was passed by about a fifth of global oil supplies. If the flow of oil in the Strait of Hormuz is stalled, the release of reserves is not considered enough to provide a quick cushion.

Pavel Molchanov, senior investment strategist at Raymond James, said oil prices were still moving in "panic mode" because they were filled with fear and uncertainty. Meanwhile, MST Marquee energy analyst Saul Kavonic assessed that the IEA's reserve release did add volume to the market, but was only able to cover up to a quarter of the potential 20 million barrels per day supply shortage if the Strait of Hormuz was closed.

Another problem is distribution. The IEA has not detailed how quickly each country will release reserves and how the oil is channeled into the market. Molchanov estimates that the additional supply will only be felt in 60 to 90 days. Therefore, market concerns about oil supplies have not subsided.