Explained: the critical role of SPRs as G7 mulls release of emergency reserves

Oil prices surged to their highest since 2022 to cross $119 a barrel on Monday on the Middle East conflict before pulling back towards $100 a barrel, paring a nearly 30 per cent spike as the International Energy Agency (IEA) convened an extraordinary meeting of member governments to discuss the energy market situation.

What’s the latest situation on the oil market?

The Financial Times reported on Monday that during the meeting, G7 Ministers and IEA Executive Director Fatih Birol, will discuss a possible joint release of stockpiles from their respective strategic petroleum reserves (SPRs) coordinated by the IEA. The outlet quoted unnamed officials as saying that three G7 countries, including the US, have so far expressed support for the idea. The move came as global oil benchmark Brent crude was trading at $105 a barrel, lower than Monday’s early session peak of $119.50.

What are SPRs and why are governments looking at tapping them?

Strategic petroleum reserves are sovereign storage of emergency crude oil, created to reduce the impact of potential disruptions in supplies of petroleum products such as what the world is witnessing currently.

The United States boasts the world’s largest SPR, with the federally-owned oil stocks stored in huge underground salt caverns at four sites along the coastline of the Gulf of America.  China and Japan hold the world’s second and third largest emergency stockpiles respectively.

The sheer size of the SPRs – the US SPR HAS an authorised storage capacity of 714 million barrels – makes them a significant strategic tool in global energy policy. Estimates place China’s SPR capacity at around 400 million barrels, while Japan maintains a stockpile of roughly 324 million barrels.

How do SPRs work and can governments coordinate their release?

According to the FT, G7 governments are considering a coordinated release of 300-400 million barrels from their stockpiles. While the governments can certainly coordinate the join release of their stockpiles with plenty of precedent, the actual process of release is more complicated as most of the reserves are stored in underground salt caverns, not regular surface tanks. The process involves injecting fresh water into the caverns to draw up the oil, transferring through pipelines to refineries or port terminals, and then working out the logistics for dispatching the stockpiles.

Will the release of SPR be enough to calm the oil market?

According to Vandana Hari, founder and CEO of Vanda Insights and a regular columnist for Energy Connects, the volume of available SPR may not be an issue. “At 1.2 billion barrels government stockpiles and 600 million barrels commercial stockpiles, the volume is enough in theory to offset the loss of 20 mil b/d for 90 days,” she commented.

In 2022, the US decided to release 180 million barrels of SPR – although the most amount they released in a single week was 8.4 million barrels. However, with around 25% of the world’s seaborne oil trade usually travelling through the Strait of Hormuz, as well as almost 20% of global exports of LNG, the world is losing more than 20 mb/day of supply. Therefore the spotlight will be on the feasible rate of release, as in practice, IEA stock releases have not exceeded the rate of 2 mil b/d.

How about the drawdown rates from the respective SPRs?

According to Vandana, G7 member countries have maximum drawdown rates, though most would have been untested in practice:

• US ~4.4 mil b/d
• Japan ~3-3.5 mil b/d
• Germany ~0.5-0.7 mil b/d
• France ~ 0.4-0.5 mil b/d
• Italy ~ 0.3-0.4 mil b/d

What are the factors driving the surge in oil prices?

Oil touched nearly $120 a barrel on Monday as more Middle East producers cut output, with a tanker traffic standstill through the Strait of Hormuz choking off crucial global supplies. In a whiplash session, WTI also reached $119.48 a barrel before paring gains. The surge is also driven by the war in the Middle East showing no signs of abating, with the traffic standstill on the Hormuz and attacks on key Gulf energy infrastructure contributing to the rally.

What’s the latest production update from the GCC and Middle East?

Crude futures surged further on Monday after Kuwait and the United Arab Emirates started reducing output over the weekend as storage rapidly fills up due to the closure of Hormuz. According to Reuters, Iraqi oil production from its main southern oilfields has fallen by 70%, with crude storage having reached maximum capacity.

The ​Kuwait Petroleum Corporation has also reduced output and declared force majeure on shipments. Saudi Aramco, which can divert some flows through pipeline via Yanbu on the Red Sea, has offered more than 4 million barrels of Saudi crude in spot tenders to offset the Hormuz closure, Reuters reported.

Qatar has already halted LNG production after attacks on key infrastructure, and Bahrain's BAPCO declared a force majeure on Monday after attacks on its refinery complex. Saudi ​Arabia has already shut its biggest oil refinery.

What is the IEA’s role in the situation?

The IEA said it was closely monitoring the situation in the Middle East, including the potential implications of any prolonged disruptions to energy flows through the Strait of Hormuz.

“The global oil market has been in significant surplus since the start of 2025. Ahead of the military actions that began on 28 February, global oil supply was also expected to far exceed demand in 2026. However, prolonged supply disruptions could flip the market into a deficit. The disruption to oil flows through the Strait has forced some operators to start shutting in production. The region’s output of refined products has also been impacted,” the IEA said in a statement.