China has banned all fuel exports for the month and Russia's diesel export ban remains in place, deepening a global shortage that has pushed diesel crack spreads to record highs. The International Energy Agency agreed to accelerate emergency stock releases and prioritize diesel as oil prices swing on Middle East supply risk.
China has imposed a ban on all fuel exports for the month, compounding a diesel shortage that has already pushed Russia into months of its own export ban. The United States had threatened a similar ban on Europe unless the region released fuel from storage.
Diesel has become the epicenter of the fuel crisis. Crack spreads for the fuel hit an all-time high of over $100 per barrel in September before easing back below that threshold. The U.S. national average diesel price stood at $6.3151 per gallon as of Tuesday, even though the country produces more diesel than it consumes.
IEA moves to speed up stock releases
The crunch prompted President Donald Trump to pressure the EU into releasing 100 million barrels of crude, diesel, and gasoline from storage. The International Energy Agency followed on Wednesday, agreeing to accelerate releases from the 400-million-barrel program it launched in March and to prioritize diesel. France's prime minister, Sébastien Lecornu, said the country would separately release 10 million barrels of diesel from its emergency stocks.
However, JPMorgan analysts cautioned the move adds little new supply. According to JPMorgan: "the headline 100 million barrels does not represent 100 million barrels of new intervention". IEA members still hold around 1.1 billion barrels of publicly held emergency oil stocks, including over 200 million barrels of diesel.
Crude swings as Hormuz risk lingers
Oil prices stayed choppy on the news. Brent crude rose 0.7% to $100.91 a barrel on Wednesday while WTI climbed 0.7% to $88.86 a barrel. Brent had fallen as low as $97.06 a barrel on Tuesday before rebounding.
The swings followed a rise in Iranian attacks on ships transiting the Strait of Hormuz, reported by the United Kingdom Maritime Trade Operations. Meanwhile, U.S. commercial crude inventories excluding the Strategic Petroleum Reserve fell by 3.2 million barrels to 424.1 million barrels in the week of October 2, against expectations of a 1.9 million barrel increase.
Europe is particularly vulnerable because of its dependence on imported fuels. Meanwhile, Middle East refineries appear still under repair following Iranian missile and drone strikes, leaving fuel security as governments' top priority ahead of decarbonization goals.
Sources: Oilprice.com, Investing.com, Investing.com
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