Europe to release 42 million barrels of emergency oil stocks
European governments will draw down 42 million barrels of emergency oil reserves over three months, half of it diesel, to ease fuel prices before winter, French Economy Minister Roland Lescure said.
France’s portion of the release includes 10 million barrels of diesel, which Lescure said would start reaching the market within days. He said the fuel would be sold at cost and predicted pump prices could fall by 12 to 18 cents per liter, with effects visible as soon as next week.
Across Europe, the release works out to about 460,000 barrels per day over three months, with roughly half of that volume in diesel. The move forms part of a wider G7 agreement reached in October to release up to 100 million barrels of crude and refined products over four months. That effort counts toward a 400-million-barrel coordinated drawdown overseen by the International Energy Agency, rather than marking a separate, additional release.
The diesel shortage stems from Europe’s long-standing reliance on imported fuel, since the region consumes more diesel than its refineries produce. Supply has tightened further after damage to Middle Eastern refineries and restrictions on Russian fuel exports. European diesel futures climbed above $200 per barrel in September, even as increased crude flows from the Persian Gulf failed to translate into more exported diesel.
The stock release follows months of unusually steep inventory drawdowns. Industry executives warned in early October that depleted global oil stocks could leave prices vulnerable to a sharp spike if another major supply disruption occurred.
EU Energy Commissioner Dan Jorgensen said Wednesday, ahead of an energy ministers’ meeting in Luxembourg, that two decades of refinery closures across Europe had been a mistake. One proposal under discussion would loosen technical rules to let remaining refineries raise output, as emergency reserves alone can supply diesel quickly but cannot replace a shortfall in domestic refining capacity.
For markets, a large, coordinated diesel release could ease near-term fuel price pressure in Europe and modestly weigh on diesel and crude benchmarks, while any shift toward loosening refinery rules would be watched as a signal on future European fuel supply and import dependence.
Source: OilPrice.com