On October 2, at around 17:00 MSK, French President Emmanuel Macron announced that G7 countries would release up to 100 million barrels of diesel fuel and crude oil from strategic reserves.
After the announcement, oil quickly fell into negative territory by about 3%.
How the reserve release will proceed
The volume will not hit the market all at once. The reserve release is planned to be stretched over approximately four months. This concerns government strategic reserves, which countries hold for serious supply disruptions, rather than using them for ordinary market sales. The G7 includes the US, Germany, France, the UK, Italy, Canada, and Japan.
When the fuel will appear on the market
According to the French side, a significant volume of diesel fuel should reach the market within 20 days.
Donald Trump said that European countries agreed to begin releasing large volumes of diesel from reserves immediately. For the oil market, this means additional physical supply in the coming weeks.
How oil reacted
By 17:18 MSK, oil was losing about 3%. However, by 17:52 MSK, the decline had stopped. The market did not continue moving down at the same pace, despite the prospect of additional supply.
Why the decline stopped
The main reason for caution is geopolitics. Market participants continue to factor in the risk of renewed or intensified US military action against Iran. This factor works in the opposite direction. The reserve release increases supply and weighs on prices, while a possible escalation around Iran creates the risk of supply disruptions and supports oil.
Two opposing factors
Right now, two strong drivers are simultaneously at work in the oil market. On one hand, the G7 is preparing an additional volume of oil and fuel from strategic reserves. On the other hand, risks around Iran and Middle East supplies remain. Therefore, the initial reaction to the G7 decision was sharp, but the further decline quickly slowed.
What's next
The main focal point will be the first actual volumes of diesel fuel, which should reach the market within 20 days. Traders will assess how quickly the additional supply can affect the fuel shortage and prices. At the same time, the market will continue to monitor the situation around Iran.
Did you watch oil plummet?
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