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G7 finance ministers said they would take the “necessary measures” to tackle the surge in oil prices but stopped short of agreeing on a release of strategic petroleum reserves after an emergency meeting on Monday.
In a joint statement seen by the FT, ministers said they wanted to address the impact of the Iran war, adding that they “stand ready to take necessary measures, including to support global supply of energy such as stockpile release”.
French finance minister Roland Lescure said the group, which met virtually with the head of the International Energy Agency on Monday, was “not there yet” on a decision to tap emergency petroleum reserves held by IEA members.
People familiar with the discussions said G7 energy ministers were expected to meet on Tuesday. “That is where action would be decided,” said one person familiar with the talks.
One US official familiar with the discussions expressed optimism that action could be taken soon after the energy meeting.
Brent crude oil has surged nearly 40 per cent since the start of the war to surpass $100 a barrel for the first time in four years, with much of the oil produced in the Gulf trapped by Iran’s threats to the Strait of Hormuz.
On Monday, Brent leapt to almost $120 a barrel in early trading, with the latest jump coming as the largest Gulf producers, including Saudi Arabia, start reducing production as they start running out of storage.
But Brent’s gains later eased and by the afternoon in London it was trading up just 5.9 per cent at $98.20 a barrel.
Fatih Birol, head of the IEA, said there were “significant and growing risks for the market” adding that conditions had “deteriorated in recent days”.
“In addition to the challenges of transit through the Strait of Hormuz, a substantial amount of oil production has been curtailed,” Birol said.
Under the IEA programme, 32 member countries hold about 1.2bn barrels in strategic reserves that can be tapped in an emergency, though this has been done only five times since the agency was founded following the Arab oil crises of the 1970s.
The G7 ministers said in a joint statement that they “discussed the current conflict in the Middle East, its impact for regional stability, global economic conditions, and financial markets, and the importance of secure trading routes”.
“We will continue to closely monitor the situation and developments in the energy markets and will meet as needed to exchange information and to co-ordinate within the G7 and with international partners,” they added.
Ahead of the meeting, one person familiar with the situation said some US officials believed that a joint release in the range of 300mn-400mn barrels — amounting to 25-30 per cent of the total reserve — would be appropriate.
EU economy commissioner Valdis Dombrovskis said the conflict could have “substantial stagflationary shocks on the global and European economy” if it extended beyond “a couple of weeks”.
If shipping disruptions in the Strait of Hormuz and attacks on Gulf energy infrastructure continued, higher energy prices could harm the broader economy, Dombrovskis cautioned, warning of the potential need for tighter monetary policy if inflation rises.
“It’s important to work to de-escalate this conflict as soon as possible . . . The sooner it happens, the more contained the impacts on the economy,” Dombrovskis said.
