- WSJ reports IEA proposed largest-ever release of oil reserves
- France to host G7 leaders call on Wednesday
- U.S. crude, gasoline and distillate stocks fell last week
March 11 (Reuters) - Oil prices rebounded on Wednesday as markets doubted whether the International Energy Agency's reported plan for a record release of oil reserves could offset potential supply shocks from the U.S.-Israeli conflict with Iran.
Brent futures traded up 59 cents, or 0.7%, at $88.39 a barrel by 0727 GMT. U.S. West Texas Intermediate (WTI) traded 98 cents higher, or 1.2%, at $84.43 a barrel.
Both contracts extended losses in early Asian trade, after plunging more than 11% on Tuesday, despite U.S. crude prices leaping 5% at the market's opening.
The IEA's proposed drawdown would exceed the 182 million barrels of oil that IEA member countries put onto the market in two releases in 2022 when Russia launched its full-scale invasion of Ukraine, the WSJ said, citing officials familiar with the matter.
In a note to clients, Goldman Sachs analysts said that a stockpile release of that size would offset 12 days of the investment bank's estimated 15.4 million barrel-per-day Gulf exports disruption.
The U.S. and Israel pounded Iran on Tuesday with what the Pentagon and Iranians on the ground called the most intense airstrikes of the war.
The U.S. military also "eliminated" 16 Iranian mine-laying vessels near the Strait of Hormuz on Tuesday, the U.S. Central Command said, as U.S. President Donald Trump warned any mines laid in the Strait by Iran must be removed immediately.
Some analysts were sceptical about the IEA's proposal and its impact on oil prices.
"Moves like IEA SPR release are not the solution to the crisis. How oil prices will evolve will depend on the duration of the Iran war," said DBS energy sector team lead Suvro Sarkar.
Near-term upside price risks will be "reined in through periodic strategic signalling moves like we have seen over the past couple of days to calm markets down", Sarkar added.
G7 officials have also gathered online to discuss a potential release of emergency oil stockpiles to soften the market blow.
French President Emmanuel Macron will host a video call with other G7 country leaders on Wednesday to discuss the impact of the conflict in the Middle East on energy and measures to address the situation.
Trump has repeatedly said the U.S. is prepared to escort tankers through the Strait of Hormuz when necessary. However, sources told Reuters the U.S. Navy has refused requests from the shipping industry for military escorts as the risk of attacks is too high for now.
SUPPLY CONCERNS REMAIN
Abu Dhabi state oil giant ADNOC has shut its Ruwais refinery in response to a fire at a facility within the complex following a drone strike, according to a source, marking the latest energy infrastructure disruption due to the U.S.-Israeli war on Iran.
Saudi Arabia, the world's largest oil exporter, is seen boosting supplies via the Red Sea, although they are still far below the levels needed to compensate for the drop in flows from the Strait of Hormuz, shipping data showed.
The kingdom is relying on the Red Sea port of Yanbu to help it boost exports to avert steep production cuts as its neighbours Iraq, Kuwait and the United Arab Emirates have already reduced output.
Energy consultancy Wood Mackenzie said the war is currently cutting Gulf oil and oil products supply to the market by some 15 million barrels per day, which could raise crude prices to $150 per barrel.
"Even a quick resolution probably implies weeks of disruption for energy markets yet," Morgan Stanley said in a note.
Reflecting higher demand, U.S. crude, gasoline and distillate stocks fell last week, market sources said, citing American Petroleum Institute figures on Tuesday.
Reporting by Katya Golubkova in Tokyo and Trixie Yap in Singapore; Editing by Sonali Paul, Jacqueline Wong and Shri Navaratnam
Source: Reuters