French President Emmanuel Macron is calling the G7 back to the table to discuss another release of emergency oil stocks as Europe loses Saudi crude deliveries and diesel prices push deeper into record territory.
Macron said Friday that he will convene G7 countries in the coming weeks to coordinate stock levels, exports and production capacity and consider tapping strategic reserves. France is also working to secure diesel, jet fuel and natural gas supplies for the coming months.
Europe has a useful card left to play. Unlike the U.S. Strategic Petroleum Reserve, European emergency stocks contain large volumes of finished fuels, including gasoline and diesel.
Diesel is exactly where the market hurts.
Europe’s diesel benchmark rose to more than $200 per barrel this week, with taxes pushing retail-equivalent costs above $300. Russia has extended restrictions on diesel exports, and Middle Eastern product exports are still constrained.
Saudi Arabia added another problem Friday when Aramco told at least two European refiners they will receive no crude under term contracts in October following the attack on its East-West pipeline. The company is trying to restore partial pipeline capacity within days, with full recovery reportedly taking about six weeks.
Aramco has found another route for roughly 60 million barrels through the Persian Gulf and ship-to-ship transfers near Oman. Most of those barrels are headed to Asian refiners. Europe is buying replacement crude from the North Sea and elsewhere instead.
The G7 has already burned through a lot of ammunition.
IEA members have released more than 300 million barrels of emergency stocks since March. Global observed inventories are still 507 million barrels lower than when the war began, after drawing at an average 2.8 million bpd over the past six months.
Another stock release could put physical barrels—and importantly, finished fuel—into Europe quickly.
It cannot repair Saudi Arabia’s pipeline, restart Russian refineries or reopen Hormuz.
By Julianne Geiger for Oilprice.com
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