IEA Speeds Up Emergency Oil Release, With 20 Million Barrels of Diesel First

PARIS. The governing board of the International Energy Agency agreed on Thursday to speed up the release of the emergency oil stocks its members pledged in March, putting diesel first. Countries already have plans in place to release more than 20 million barrels of diesel from the remaining volumes as soon as possible, the agency said after the board met.

Diesel is the tightest part of the market

The board said the agency's latest assessments show oil markets remain tight, with diesel the tightest part. Member governments held more than 200 million barrels of diesel in public emergency stocks as of October 7. About 330 million barrels from the March pledge have been released so far, up from roughly 325 million barrels reported after members met on October 7, and around 100 million barrels are still to come. Because some countries have released more than they promised and others plan to do the same, the total is set to pass the 400 million barrels pledged in March, in the collective action the agency organised in response to the Strait of Hormuz crisis.

Diesel prices have surged to record highs in many markets as the wars in the Middle East and between Russia and Ukraine disrupt supply, a squeeze that feeds straight into food and goods prices. In the United States, diesel has eased for three weeks. The national average was 6.179 dollars a gallon in the week that ended October 12, down from a peak of 6.529 dollars on September 21, Energy Information Administration figures show. After the board statement, Europe's benchmark gas oil contract ticked higher to 1,430.75 dollars a metric ton by 1512 GMT, though it was still lower on the day.

No new barrels, and some disappointment

Thursday's decision adds no new oil. It answers the first of two requests the agency's executive director, Fatih Birol, made public on October 11: speed up what is left, diesel first. His second request, that members consider whether further diesel releases are needed, was left open. The board said members were ready to take further action if needed, building on an October 2 statement by Group of Seven leaders.

There was also disappointment at the size of the diesel number. The 20 million barrels is lower than the 50 million barrels that had been considered earlier, a source familiar with the talks told Reuters. Reuters reported this month that European governments had discussed a French proposal to release 50 million barrels of diesel alongside 50 million barrels of crude.

Pressure from Washington

President Donald Trump has pressed European Union countries to draw down their reserves, with a possible United States diesel export ban raised if they do not, as he works to lower fuel prices before the November 3 midterm elections, Reuters reported. The board also urged member countries that produce and refine oil to raise their supply of crude and fuels, diesel in particular, and said energy trade should flow freely.

The agency's secretariat will track the remaining releases and report back to the board and to G7 leaders on whether more action is needed, based on a fresh assessment of the oil market that focuses on diesel.