President Trump announced today that European countries have agreed to release diesel from their emergency stockpiles, following pressure from the White House to help bring down record prices for distillate fuel. Global diesel supplies have tightened this year because of disruptions in the Middle East, Ukrainian attacks on Russian refineries, Russia's suspension of diesel exports, and lower exports from other suppliers. 

According to Reuters, European Union governments met this morning to consider a French proposal under which European countries would release 50 million barrels of diesel, and members of the International Energy Agency (IEA), the 32-nation body that coordinates emergency oil reserves, would release another 50 million barrels of crude oil. Following a call with Group of Seven (G7) leaders today, French President Emmanuel Macron's office said the G7 will release 100 million barrels through the IEA over four months, beginning immediately, including 'a frontloaded substantial diesel release within the first 20 days.' The release is to be carried out by G7 members and partners. The statement does not specify country contributions, the split between diesel and crude, or how much of the 100 million barrels was previously committed under the March IEA release.

The announcement follows a warning from the administration that Germany and France must draw down their emergency diesel inventories or face a potential ban on U.S. diesel exports, which the White House has been weighing to lower domestic fuel prices. European governments discussed tying any release to a U.S. commitment not to impose a ban.

President Trump participated in the G7 call, according to a White House official. The G7 leaders' statement, which includes the U.S., reaffirms a commitment to refrain from export restrictions on energy and energy products between G7 countries, and calls on all producers to avoid imposing bans. That commitment is specific to exports between G7 countries, and we have not seen the Administration say whether a broader U.S. diesel export ban is off the table.

G7 leaders said they will convene the IEA in the coming days to discuss whether additional diesel releases are necessary.

Markets moved lower on the news. NYMEX ULSD futures, the benchmark for wholesale heating oil, were trading near $4.50 per gallon at the time of writing, down roughly 3% to 4% in afternoon trading. For scale, EU countries held about 350 million barrels of diesel in June, including roughly 267 million barrels in strategic reserves, according to Eurostat. Analysts estimate the diesel portion of the release would add about 415,000 barrels per day of supply, assuming about half of the 100 million barrels is diesel. The release builds on the 400-million-barrel drawdown IEA members agreed to in March, the largest in the agency's history.

The United States also holds 1 million barrels of ultra-low sulfur diesel in the Northeast Home Heating Oil Reserve, managed by the Department of Energy (details here). Some members of Congress have called for its release citing high heating oil prices. No release has been announced.

For more information, please contact NEFI Manager of Government Affairs, Liam Dotson, at liam.dotson@nefi.com.