European diesel prices may come under pressure in the near term following the decision by the Group of Seven to release up to 100 million barrels of crude oil and petroleum products from strategic stocks, an analyst at Argus Media has said.
The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, with the European Union also participating in the group’s meetings. The group focuses on major global economic, energy, security and international issues.
Senior analyst at Argus Media, Sarah Raffoul, said the coordinated release, which includes a front-loaded diesel release, is likely to ease immediate supply concerns and weaken risk premiums as additional barrels become available during the early part of the winter season.
“The measure is likely to reduce prompt market tightness and weaken risk premiums as additional barrels become available during the early part of the winter season, although the final breakdown between crude and products has yet to be disclosed,” she said.
According to Raffoul, the impact is expected to be felt mostly in October and November, when most of the released volumes are likely to reach the market.
She said the announcement also reduces concerns over export restrictions and includes commitments to maximise refinery utilisation, further improving confidence in near-term diesel availability.
However, Raffoul said the release does not fundamentally change the broader supply outlook because the additional barrels are being drawn from existing inventories rather than new production.
“The additional barrels are being drawn from existing inventories rather than new production, meaning the measure provides temporary relief rather than a lasting increase in supply,” she said.
She noted that several factors continue to support diesel fundamentals, including unplanned refinery outages in Asia, uncertainty surrounding Chinese export volumes and continued restrictions on Russian diesel exports.
“Europe also remains reliant on imports to balance its diesel market, leaving it exposed to disruptions in global trade flows,” Raffoul said.
She said the stock release is likely to cap further price increases and ease immediate supply concerns, but is unlikely to eliminate them entirely.
“OECD European diesel inventories remain relatively low by historical standards, while strengthening jet fuel markets have pushed the European jet-diesel regrade back into positive territory,” she said.
Raffoul added that the development suggests diesel values may need to strengthen relative to current levels to restore the normal relationship between the two products.
She said stronger refinery runs, Chinese export policy and sustained stock releases could leave the market more comfortably supplied than currently expected.
“On the other hand, further refinery disruptions, weaker exports, stronger winter demand or delays to inventory rebuilding could allow tightness to deepen once the effect of the stock release begins to fade,” she said.
Raffoul said the announcement points to softer European diesel prices in the near term, but noted that underlying fundamentals suggest any weakness is more likely to reflect a reduction in supply risk than a meaningful loosening of market balances.
The PUNCH reported that diesel is almost N2,000 per litre in Nigeria. The fuel is mainly used by industries and heavy-duty vehicles in Nigeria.
