Tomorrow, the 32 countries that are members of the International Energy Agency (IEA) will vote on an IEA proposal to tap their strategic petroleum reserves to bring down oil prices, which have been boosted by the latest war in the Middle East. The release would exceed the oil that IEA countries released after Russia invaded Ukraine in 2022. The IEA members hold 1.8 billion barrels in reserves, which include 600 million barrels in commercial inventories. That would offset about 124 days' supply trapped on the wrong side of the Strait of Hormuz.
This news came out this evening and had no impact on Brent and WTI crude oil prices because it was expected after the G7 Finance Ministers and Central Bank Governors held an emergency virtual meeting yesterday. They issued a joint communiqué stating they "stand ready to take necessary measures," specifically mentioning a coordinated release of strategic petroleum reserves. Reports suggest the group is weighing a release of 300 million to 400 million barrels—a move that would dwarf the 240-million-barrel release following the 2022 invasion of Ukraine.
Earlier today, oil prices dropped on news that Secretary of Energy Chris Wright claimed in a social media post that the US Navy had successfully escorted a tanker through the Strait of Hormuz. The White House quickly said that Wright was wrong, causing the stock market's rally to fade this afternoon. Both the S&P 500 market-weight and equal-weight indexes remain just above their 200-day moving averages during the current pullback (chart). That's impressive under the circumstances.
The stock market should react positively tomorrow morning to the IEA news and to Oracle's better-than-expected results after the close. The company's stock surged in after-hours trading on a 22% y/y increase in revenue led by a 44% jump in cloud revenues, and a 21% gain in earnings. Most remarkable is the 325% jump in remaining performance obligations (RPOs). Management attributed this almost entirely to large-scale AI contracts. Could it be that AI isn't a bubble after all? That's been our position.
