G7 Oil Stocks Release Is A Band-Aid Fix in Broken Fuel Market
Freeport LNG Ramps Up Gas Intake After Train 2 Shutdown What I Cover Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,… Crude oil prices and middle distillate cracks slumped at the end of last week as the G7 group of nationsannouncedthe release of 100 million barrels of oil stocks over four months, including a front-loaded substantial diesel release within the first 20 days by G7 members and partners.
The market welcomed the release announcement with lower oil prices.
Gasoline and diesel prices in the United States have also dropped in the past few days, as the U.S.
crude oil benchmark, WTI, slumped to about $90 per barrel and some statesintroduceda motor fuel tax holiday until the end of the year.
The price reaction to the stocks release showed that market participants are focused on the immediate impact of more diesel supply in the near term.
But this would be only a band-aid solution to ease the tight fuel markets, analysts warn.
Once the market realizes that the new stock draw further depletes available stocks in case of further emergencies, concerns about available cushions against additional disruptions will return, analysts say.
The fix with the announcement of the 100-million-barrel release will remain only temporary if product flows from the Middle East remain constrained, they say.Related: Aramco CEO Warns Oil Inventories Are ‘Scarily Thin’ Depleting already depleted oil and diesel stocks, when there isn’t supply to replenish them, soon leaves the fuel markets even more vulnerable to future disruptions.
The immediate relief at the pump will only be transitory unless fuels resume normal flows out of the Strait of Hormuz.
The dip in gasoline and diesel prices is a win for U.S.
President Donald Trump, who can, and surely will, take credit for lowering the prices just ahead of the mid-term elections in early November.
Administration is looking at the short-term impact of lower fuel prices, but the market tends to look at much longer horizons.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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