As the world acts to stabilize oil prices, Canada sees a potential windfall

The International Energy Agency agreed on Wednesday to release 400 million barrels of oil from its strategic reserves in order to tamp down surging prices caused by the closure of the Strait of Hormuz and other disruptions to the oil industry in the Persian Gulf.

That's more than twice the amount the IEA released to calm markets following Russia's full-scale invasion of Ukraine in 2022.

"The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA member countries have responded with an emergency collective action of unprecedented size," said IEA director Fatih Birol.

An official with Natural Resources Canada told CBC News that Canada will contribute to the release, although the precise amount probably won't be determined until the end of the week.

As a producer country, Canada is not required to hold a strategic reserve in storage tanks in the same way that importer countries are, so the Canadian release will come mostly in the form of increased production achieved through measures such as delaying scheduled maintenance and increasing pipeline flows.

The release, said Tyler Meredith, lead economic adviser to the prime minister from 2015 to 2022, "is really just to buy time" while the global oil supply remains constrained for "probably most of the next year."

That means higher prices, which experts say will have a large effect on bottom lines for Canadian governments, corporations and individuals.

The release represents about a third of the oil stored by IEA's 32 member governments. But it's also less than four days of global consumption, and no one knows how many more days the Strait of Hormuz will remain closed.

For every day that it does, the world loses about 15 to 20 million barrels of production, says analyst Rory Johnston of Commodity Context.

That loss, primarily to Asian markets, "is kind of an air pocket" in global oil supply that will soon hit shore.

"When that air pocket lands, that's when inventories are going to start drawing really aggressively. And that's when the physical market will force some kind of higher price," he said.

How high that price could go depends almost entirely on outcomes in the Persian Gulf that remain wildly unpredictable.

Monday may have been the most volatile day in the history of oil trading. But few experts are confident how long that record could stand.

Brent crude, the world's benchmark barrel, surged 30 per cent to just under $120 US, then dropped by an even larger amount in response to U.S. President Donald Trump's confusing claims that the war was "very complete" and "going to be finished pretty quickly."