G7 oil stock release puts diesel first, but much of it was promised in March

The G7 agreed on Friday to release 100 million barrels of oil and diesel from emergency stocks over four months, starting at once, with “a frontloaded substantial diesel release within the first 20 days”, their joint statement said. It came after a week of pressure from Washington. President Donald Trump had threatened to ban exports of American diesel, Bloomberg reported.

Diesel fell on the news. In Europe, diesel’s premium over crude dropped to as little as $69 a barrel, from $76.77 on Thursday, and refining margins fell by about 10%, according to Bloomberg. Crude barely moved. Brent fell at first and then recovered, to settle 6 cents lower at $102.25 a barrel, Reuters reported. US crude fell 1.9% to $91.11.

Much of it was promised already

The statement is worded with care. “Taking into account commitments that have already been fulfilled,” the leaders said, they “will implement our commitments” through the 100m-barrel release. Those commitments date from 11 March, when the 32 members of the International Energy Agency pledged 400m barrels after the Iran war began, the largest release in the agency’s history.

By the IEA’s count, 325m barrels of that pledge had been released by Friday, more than 80%. That leaves about 75m barrels still owed. So up to three-quarters of Friday’s 100m barrels could be oil that governments had already promised. What is new is the speed and the product: the release starts at once, and diesel goes first.

Some countries had been slow. Germany had released only 23% of its pledge by Tuesday, and Spain about a third, Bloomberg reported. The US approved 40m barrels from its Strategic Petroleum Reserve this week, which completes its share of the March pledge.

Why diesel goes first

Diesel is where the shortage is. “The energy market impacts of the Strait of Hormuz crisis remain acute, especially in diesel markets,” Fatih Birol, the IEA’s executive director, told the leaders. Refined-product flows remain “severely constrained”, he said, and Ukrainian attacks on Russian refineries have made diesel scarcer still.

The pump price shows it. The average US retail price of diesel reached $6.53 a gallon in the week of 21 September, the highest in the EIA’s weekly series, which began in 1994. That was 71% more than in the last week of February, before the war, when it was $3.81. It eased to $6.38 in the week of 28 September.

The statement also asks for more refining. The G7 countries will coordinate maintenance at their refineries, so that plants do not shut at the same time, and raise run rates where they can. They “reaffirm” a commitment not to restrict energy exports between G7 countries, which covers the American diesel that Europe feared losing. “Europe is feeling pretty vulnerable,” Phil Flynn of Price Futures Group told Reuters. “Europe would be one of the areas to suffer the most if we put an export ban on diesel.”

Hours after the statement, Trump ruled the ban out. “We’re not going to be doing the export ban,” he told reporters, Politico reported. It “was never really ever on the table”, he added, though he had said for two weeks that he was open to one.

The leaders also called on “all producers” to avoid export bans. That would include China, whose refiners have stopped selling fuel abroad for October, as we reported on Friday.

How big the G7 oil release is

Spread evenly over four months, 100m barrels comes to about 800,000 barrels a day. The statement does not say how much of it will be diesel. The French proposal behind it was for 50m barrels of diesel from European stocks and 50m barrels of crude from IEA members, Reuters reported. If half is diesel, that is about 400,000 barrels a day on average, and more at the start.

For comparison, about 1.4m tonnes of Chinese diesel was loaded for export in September, by trade estimates that Reuters reported. At about 7.5 barrels a tonne, that is roughly 10m barrels, or about 350,000 barrels a day. A diesel release on that scale would roughly replace what China has taken off the market for October. It would not add refining capacity, which is what the market lacks.

What to watch

• By 22 October: the front-loaded diesel release, due within 20 days, and the IEA’s follow-up report, which the leaders want “before 20 days”.
• In the coming days: an IEA meeting on “the possibility of additional diesel releases as necessary”.
• After 7 October: whether Beijing allows fuel exports again when its National Day holiday ends.
• The diesel premium: whether it stays near $69 once the barrels reach the market.