Brent crude briefly dropped under $99 a barrel on Friday morning, when G7 nations said they would tap their emergency stockpiles for as much as 100 million barrels of crude and diesel. The dip didn't last. December Brent settled at $102.25, only 6 cents down on the day.
WTI kept more of its losses. The November contract closed at $91.11, a 1.9% decline, after spending part of the session below $89.
What the G7 agreed
France, which chairs the G7 this year, announced the package after Emmanuel Macron and Donald Trump spoke by phone overnight. The International Energy Agency (IEA) will run the release over four months, starting right away. The G7 statement promised "substantial" diesel volumes within 20 days.
Members also promised to run their refineries harder and to keep fuel moving freely between them, with no trade curbs. That second promise was aimed squarely at Washington. Trump had been weighing a US diesel export ban, and Macron told reporters Friday that Trump was "very clear" there would be no export bans.
Trump claimed the win on Truth Social, saying Europe would now put a "massive amount" of its stored diesel on the market.
The official statement gave no split between crude and diesel. A French proposal that EU governments discussed earlier in the day called for 50 million barrels of diesel from Europe and 50 million barrels of crude from IEA members, Reuters reported.
Diesel took the hardest hit
Fuel markets reacted faster than crude. At one point European diesel futures were down more than 8%, and US diesel futures lost as much as 5.6% before clawing some of it back. The gap between diesel and crude prices shrank to around $69 a barrel. On Thursday it stood at $76.77.
Drivers haven't felt it yet. US retail diesel hit a record $6.53 a gallon in September.
Why traders aren't convinced
Divide 100 million barrels across four months and you get around 830,000 barrels a day. That's less than 1% of world oil demand, and a quarter of the 400 million barrels the IEA lined up in March.
Then there's the refinery problem. Crude sitting in a salt cavern isn't diesel. It has to be refined first, and refining is the tightest link in the chain right now. Delivery has been slow, too. Only around two-thirds of the March volumes have reached the market so far, according to IEA head Fatih Birol. As of Tuesday, Germany had handed over roughly 23% of its March pledge and Spain about a third.
Analysts didn't mince words:
- Scott Shelton of TP ICAP said the release caps how far diesel can rally, though the volume itself is modest.
- Joe DeLaura at Rabobank called it a stopgap that only buys the market another month or two.
- Energy Aspects saw a big headline number meant mainly to talk Trump out of a diesel export ban, rather than a firm, detailed pledge.
Supply risks pulled Brent back up
By the afternoon, traders had turned back to the Middle East. Riyadh is preparing a military push against the Houthis in Yemen, Reuters reported Friday. The main goal is to win back the Bab el-Mandeb strait, the southern gateway to the Red Sea, which the Houthis seized last month. The group has also hit Saudi energy sites several times since August, including Aramco's Jazan refinery.
On top of that, the Pentagon is sending the USS Theodore Roosevelt to the region. A US official told the Associated Press that three American carriers could be in the Middle East by late October, a buildup last seen in April. Meanwhile, China's refiners have suspended most fuel exports for October, pulling even more diesel out of a short Asian market.
Physical crude tells the same story. Dated Brent, the price for actual North Sea cargoes, climbed above $120 a barrel this week, far above futures. The same tightness has been showing up in the gap between Brent contract months.
What to watch
OPEC+ meets on Sunday, October 4, and is expected to leave output targets unchanged. The bigger test is the G7's own 20-day window. If the first diesel barrels reach European ports late or in small volumes, Friday's morning sell-off may be most of the relief this release delivers.