The Zhitong Finance App learned that US President Donald Trump said he would not announce a unilateral ban on US diesel exports after the G7 and its partners agreed to release some emergency fuel reserves to curb the sharp rise in prices.
The G7 emergency large-scale release and maintenance of smooth trade will jointly mitigate the shortage of diesel. It is expected to reduce the cost pressure on transportation, agriculture, and manufacturing, release immediate supply constraints, and abandon the embargo to reduce the risk of market fragmentation. The two measures will jointly improve fuel supply expectations. Although the Western countries' energy supply emergency has been fully launched, driving energy inflation to cool down for a short time, it is still a major unknown whether energy inflation will continue to decline. Investors' focus is shifting from the number of crude oil barrels to the delivery of refined oil products, the utilization rate of large refineries, and the efficiency of energy shipping. The effectiveness of the policy will be determined by actual supply implementation.
The coordinated release of G7 (Group of Seven) reserves promoted by French President Emmanuel Macron has been upgraded from a discussion plan to a commitment to action; Trump later made it clear that the US will not implement a ban on diesel exports. This set of policies on oil supply can be described as targeting two major energy inflationary pressures at the same time — relieving immediate oil supply constraints by releasing stocks, and avoiding further fragmentation of European and American diesel market prices by maintaining cross-border trade. The G7 and partners plan to coordinate the release of up to 100 million barrels of reserves within four months, and concentrate on putting in large quantities of diesel in the first 20 days, while also coordinating refinery maintenance and increasing operating rates when conditions permit.
However, for investors, what needs to be accurately distinguished — the latest developments are reserve arrangements for crude oil and refined oil products, not additional crude oil production capacity; the government has yet to clarify the final product distribution ratio.
“Europe has plenty of diesel, and they will make a significant energy contribution to global supply — so do we,” Trump told reporters at the White House on Friday local time. “As a result, we will not be enforcing an export ban.”
The group, which consists of major economies in Europe, North America, and Asia, agreed on Friday to release up to 100 million barrels of emergency crude oil and diesel resource reserves after strong pressure from the Trump administration.
“I did ask them for this, and we will get a lot of oil,” Trump added. “They did a great job.”
At the time Trump made this statement, the trading prices of diesel and other refined oil products are experiencing record price spikes. Diesel fuels many activities in the modern economy, including driving agricultural machinery, supporting extensive US transportation, and heating and electricity to rural communities.
Diesel can be described as the lifeblood of transportation and commercial activity. Its key role means that price increases have spread to the entire economy, driving up the costs of various consumer goods, and the November US midterm elections are approaching.
The president's decision meant that he stepped back from his previous position of considering restrictions on diesel exports, and also rejected the demands of some Republicans in rural and midwestern regions who were anxious about the election situation. These people have called for restrictions on energy exports to lower fuel prices, which put heavy pressure on voters before the election.
Trump insisted on Friday that a ban on diesel exports has never been taken as a seriously considered option. “We never intended to do this,” he told reporters. “I don't think we have any.” However, last month, the US president said he had encouraged advisors to support this measure.
Trump's current approach is also seeking a delicate balance between two core supporters: the farming community in the American hinterland, where some current Republican lawmakers are facing a difficult election campaign; the other is oil interest groups that benefit from the president's support for traditional fossil fuel policies, such as ExxonMobil and Chevron, the two largest traditional energy giants in the world.
In recent weeks, several prominent Republicans have pushed for export restrictions, including Iowa Senator Chuck Grassley and Alaska Senator Dan Sullivan, who is facing a fierce re-election campaign.
However, oil industry leaders and energy experts have once again warned that restricting foreign sales of diesel will at best lead to short-term price relief; then, as domestic inventories expand, costs will rise again rapidly as US oil producers and refiners cut production.
Some government officials, including Energy Secretary Chris Wright and Home Secretary Doug Bergum, have expressed similar concerns internally.
Before the midterm elections, the cost of fuel and other consumer goods was one of voters' main complaints. The rise in diesel prices is particularly prominent because the war between Russia and the Middle East has shut down some refining facilities and disrupted energy transportation.
As of Friday, the average retail price of diesel in the US was $6.37 per gallon, according to the American Automobile Association.
The oil reserve release operation announced on Friday and coordinated by the International Energy Agency is expected to bring only short-term relief. French President Emmanuel Macron said on Friday that related supplies will be launched over the next four months, with the initial energy investment focusing on diesel.
Europe is highly dependent on US diesel exports, and this release is seen as a measure to avoid the US ban on foreign fuel sales. G7 countries have now reaffirmed their commitment to “not impose export restrictions on energy and energy products” among member states.
In the US, oil company executives have been pleading with Trump administration officials to consider other options, and warned that even short-term export restrictions could trigger domestic production cuts and damage America's allies in Europe and Latin America.
Under a plan the Trump administration is seriously considering, the Trump administration will lift restrictions on the sale of red or dyed diesel. This type of diesel is usually used for off-road use and has been exempt from duty for a long time. The plan will allow retailers to sell dyed diesel exempt from federal excise duty of 24 cents per gallon for use in trucks and other road vehicles.
Overall, the Trump administration is seriously considering easing restrictions on the sale and use of dyed diesel. This type of diesel, which is usually red, is mainly used for off-road operations and is exempt from tax exemptions. If the plan is implemented, retailers will be allowed to sell this type of diesel to trucks and other road vehicles while retaining their exemption from federal excise tax of 24 cents per gallon.
100 million barrels started a “diesel cooling war”, the embargo threatened to leave the market, and oil prices rebounded after a sharp drop in the intraday period
The G7 and partners plan to coordinate the release of up to 100 million barrels of reserves within four months, and concentrate on putting in large quantities of diesel in the first 20 days, while also coordinating refinery maintenance and increasing operating rates when conditions permit.
Driven by this news, there was indeed a sharp correction in oil prices on Friday, but this description only applied during the intraday trading period. The final settlement performance showed a strong rebound in oil prices after experiencing a sharp intraday decline. The news of the G7 countries' collaborative release of reserves pushed Brent to fall below $100 per barrel, then clearly recovered; in the end, Brent almost leveled off, while WTI crude oil retained a relatively obvious decline. Using February 28, the last trading day before the war broke out — February 27 — as a benchmark, energy prices are still significantly higher than pre-war levels.
According to the October 2 settlement price, the international crude oil benchmark, the price of Brent crude oil, closed at $102.25 per barrel, and finally closed down 0.06%, rebounding after falling below $100 in the intraday period; WTI crude oil prices closed at $91.11 per barrel, down 1.90% on the same day; Brent and WTI crude oil futures surged 41% and 36% respectively from the last trading day before the US-Iran war broke out.
On the supply side, Saudi Arabia is speeding up the restoration of energy delivery capabilities around the Strait of Hormuz. According to media reports citing information revealed by people familiar with the matter, Saudi Arabia's east-west oil pipeline transports close to 6 million barrels per day, accounting for about 86% of the design capacity of 7 million barrels; after deducting demand from West Coast refineries, it can be exported about 4.5 million barrels. What the recovery here emphasizes is transportation capacity, and the amount of available export flow is not equal to the volume of exports already loaded on ships. Yanbu Port can go north to Europe via the Suez Canal, and south to Asia usually needs to go through the Mander Strait, so bypassing Hormuz does not mean that the entire transportation route has been freed from safety restrictions.
The situation in the Middle East is still showing a parallel state of “energy transportation has resumed and military risks continue”: some energy transportation in Hormuz has increased, but there are still cases where ship identification signals are closed; the US continues to deploy a third aircraft carrier and reinforcements. While maintaining indirect contact through Qatar, Iran is preparing to expand its counterattack in the event of a new round of large-scale attacks.
As energy shipping in the Strait of Hormuz continues to face military attacks and blockades, some media recently revealed that Saudi Arabia is planning to support Yemeni forces in launching an offensive against the Houthis to improve the safety of the Red Sea waterway. The operation has not yet been carried out. Meanwhile, the media quoted information revealed by people familiar with the matter as reporting that late on Friday local time, a large crude oil tanker was hit by unknown projectiles about 4 nautical miles east of Oman, and the crew was safe.
Releasing reserves opens the energy cost pressure relief valve, but the long-term treasury bond market is still re-evaluating inflation and fiscal pressure
The G7 coordinated release of the diesel export ban with the US, providing dual support for mitigating global energy costs: supplementing short-term supply and maintaining smooth cross-border trade. Diesel is widely used in freight, agricultural machinery, and industrial activities, and changes in its price will affect corporate profits and consumer prices through transportation and production costs. According to the International Energy Agency, crude oil exports to the Middle East have clearly recovered, but the supply of refined oil products is still severely limited, and attacks on Russian refineries have further exacerbated diesel tension. As a result, prioritizing diesel, coordinating refinery maintenance, and improving the utilization rate of available production capacity have responded to current supply bottlenecks in a more targeted manner.
The positive effect of this round of coordination policies is to buy time for the restoration of refineries and transportation systems. Up to 100 million barrels of reserves will be released within four months, with a large amount of diesel scheduled to be put on sale in the first 20 days. However, market traders may be more concerned about the actual speed of energy delivery, product composition, and whether subsequent supply can continue in the Middle East region and the world, rather than judging price declines based only on the announced total volume.
Improved energy supply helps ease inflationary pressure, but long-term treasury bond yields in global financial markets are also affected by policy interest rate expectations, bond supply, and term premiums. After the US non-agricultural announcement on Friday, the yield on 10-year US Treasury bonds fell to about 5.157%, then rebounded to 5.281% at the end of the New York session, then rose by about 4.7 basis points on the same day; British long-term bonds recovered moderately. These latest signs all indicate that countries' bond markets are still pricing according to their own inflation, fiscal, and monetary policy conditions.
From an investment perspective, improving diesel supply is first beneficial to transportation, agriculture, and manufacturing companies to control costs; for popular AI infrastructure companies with semiconductor and AI computing power themes, the positive impact may also be further positively transmitted through easing inflation expectations, improved financing conditions, and a recovery in risk appetite. The decline in energy costs has created favorable conditions for valuation restoration, and the actual strength of the restoration still depends on long-term risk-free yield trends of 10 years or more, credit spreads in the bond market, and the common changing trajectory of profit expectations of core companies that have a high weight in the index related to AI computing power.