The Zhitong Finance App learned that French Minister of Economy Roland Lescure (Roland Lescure) said before the EU Energy Ministers Meeting in Luxembourg on Thursday that as part of a promise to calm oil prices, Europe will put 42 million barrels of oil reserves on the market over the next three months, half of which is diesel. The 10 million barrels of diesel announced by France last month will enter the market in the near future, and the cooling effect on prices can be seen as early as next week; this batch of reserves is supplied at cost, which is expected to reduce the retail price of diesel by 12 to 18 euro cents per liter.
Lescure said diesel was “at the heart of all our challenges”; he hoped the current crisis would be resolved “slowly but surely,” while stressing that Europe would retain the option to continue using stocks.
Zero for crude oil, marginal for diesel
42 million barrels were spread over 90 days, or about 467,000 barrels per day, including about 230,000 barrels per day of diesel. Less than 0.5% of the global crude oil market of hundreds of millions of barrels per day, but what is really lacking in this round is not crude oil, but intermediate distillate oil.
According to IEA estimates, exports of refined oil products from the Middle East are now less than half of what they were before the war, leaving a gap of about 600,000 b/d; on the Russian side, combined with the July 8 ban on diesel exports and continued attacks on refineries, Russian diesel exports fell sharply from 700,000 to 900,000 b/d all year round. The total of the two places is a gap of one million barrels, and 230,000 barrels per day can only be considered a marginal supplement; not to mention that the Middle East is both a crude oil producer and a refining hub, and the restoration of refined oil products installations is far slower than the return of crude oil shipments.
Prices reflect this even more. The price spread for diesel cracking rose from 20-40 US dollars per barrel before the conflict to about 100 US dollars in October, and European diesel futures returned above $200 per barrel; Brent crude oil fluctuated around 110 US dollars this week (closing at 111.64 US dollars/barrel on October 28, up 2.04% in a single day, WTI closed at 102.78 US dollars/barrel, up 2.88% in a single day), and the year-on-year increase was still over 70%.
Sold out, not loaned
France “sells” rather than “lends” these 10 million barrels. Dealers can purchase at the average cost of about 0.28 euros per liter at the time of storage; the government finally decided not to replenish the stock after putting it into storage — Le Corney's original statement was “the operator has one year to make up this batch of reserves.”
There are two reasons for not replenishing stocks: if the geographical situation continues to be tense, dealers will only be able to make up for it at higher prices in the future, causing a retaliatory rebound in oil prices; French diesel consumption has declined year after year, and the need to replenish reserves is also declining.
The cost is also clear: these 10 million barrels account for one-fifth of France's total strategic reserves of diesel, and the design goal of the entire reserve is to guarantee the country's diesel consumption for three months. Use the first quarter's energy security buffer in exchange for three months of price relief — reserves are a buffer, not production capacity.
Diesel prices have become fuel for French politics
The point in time is no accident. According to data from the French government on October 27, 11% of the country's gas stations are lacking at least one type of oil, and 677 gas stations have completely cut off supply, an increase of 21% over the previous week; fuel sales of the supermarket and service station group Coopérative U have dropped 10% since the beginning of the year, and some stations have dropped 40% since October.
The streets are also burning. On October 17, hundreds of thousands of people took to the streets to protest against the deterioration of living costs and public services, which turned into clashes in many places; on the night of October 21, Paris police imposed a curfew on the area around Place de la Repubblica; on October 24, 135 people were arrested in a new round of demonstrations. Student organizations are already scheduled to launch another national protest on October 31 and November 5 — even though Prime Minister Le Corney just made concessions on October 26, promising 15,000 additional college admissions places, a five-year capital injection of 1 billion euros, and a 4 billion euro school renovation loan.
This is Lescure's dilemma: it is necessary not only to contain street anger, but not to widen the deficit. He has made it clear that any additional expenses in the future will have to be covered by equal cuts. In addition to releasing reserves, the government has also finalized an additional supply of about 300,000 tons of diesel per month from Saudi Arabia, the United Arab Emirates, and Bahrain, which is equivalent to about one-sixth of France's monthly diesel consumption. Households did not cooperate: in 2025, the average savings rate for French households was 18.3%, the highest level since 1980, excluding the pandemic.
Mitigation is marginal, market pricing is elsewhere
The bond market doesn't price diesel; it's the budget. The yield on French 10-year treasury bonds hit 5.14% on October 22, the highest since July 2002; the spread widened to about 175 basis points on the same day as German treasury bonds, the widest since the European debt crisis in 2011. Moody's unexpectedly maintained its Aa3 rating on October 23, and the outlook was negative. The spread then narrowed to 153 basis points, but widened by about 6 basis points on October 27. Moody's left the door open: if the budget is not approved, or the government cannot implement the budget by law due to the collapse of a motion of distrust, it is not ruled out to take the opportunity to lower it.
The key point is the 2027 budget: 54 billion euros of fiscal consolidation (43 billion new measures plus 11 billion ongoing measures), with the goal of reducing the deficit rate from 5.4% this year to 5%; the government itself admits that if no action is taken, the 2027 deficit may rise to 6.5%. The ruling faction has no majority in the 577-seat National Assembly (about 190 seats on the left, 161 seats in the National League, 123 seats in the National League), and the 2026 budget was forced by using section 49.3 of the Constitution three times — both Barnier and Belou governments fell on the budget. Currently, the “revenue” portion of the social security budget has been rejected. The vote on the income portion has been postponed from October 20 to October 27, the full budget vote is on November 17, and the S&P assessment is on November 27.
At the stock market level, the release of reserves is structural rather than directional. CAC 40 has accumulated a cumulative decline of about 4% this year, and Stoke Europe 600 rose nearly 8% during the same period. It is beneficial to the cost side — the pressure on fuel expenses for transportation, logistics, chemicals, and retail has been reduced; on the refining side, it is bad. The cracking and compression of diesel to an extreme high of $100 per barrel is the source of profits for European refineries in this round. If diesel reserves enter the market to reduce the diesel premium, the profit of refining stocks is expected to be reversed. Bank of France stocks (Bank of France and Pakistan, Société Générale, Agricultural Credit) hold a large amount of domestic treasury bonds, and sovereign risk is transmitted to the stock market mainly through this channel, not oil prices.
In terms of exchange rate and monetary policy, 42 million barrels are not enough to change the path. Eurozone inflation is 3.8% and the deposit facility interest rate is 2.50%, and the market is still inclined to raise interest rates in December. What is more noteworthy is natural gas: European wholesale gas prices hit 100 euros per megawatt hour on Wednesday, the first time since December 2022; the EU gas storage rate is 75%, down from 83% in the same period last year.
Three potential judgments
First, what relieves pressure is on the retail side and expectations, not global supply and demand. This is a one-time financial concession that sells stocks at cost and does not replenish stocks. The effect is concentrated on pump prices in France and Western Europe. The scale is about ten euro cents per liter.
Second, the diesel gap is determined by Middle Eastern refinery load and Russian exports; it is not in European oil storage tanks. The IEA is in line with the seller's research: even if direct supply disruptions ease, the tight balance of refined oil products is likely to continue until mid-2027; not to mention that subsequent replenishment of stocks by countries will reverse demand for crude oil — the US strategic oil reserves have fallen to 282.7 million barrels, the lowest since 1982.
Third, for French assets, the release of reserves is a political tool rather than a pricing variable. It may be the upper limit for a few weeks of street calm; the direction of OAT spreads and Bank of France stocks still depends on the November budget breaking through and whether anyone rallies 289 votes to step down the government.