G7 Launches "Oil Price Cooling War"! Release of 100 Million Barrels of Oil Reserves Combined with Trump Abandoning the Ban Offers a Key Relief Valve for Global Inflation

According to Zhitong Finance APP, U.S. President Donald Trump stated that after the Group of Seven (G7) and its partners agreed to release some emergency fuel reserves to curb soaring prices, he will not announce a unilateral ban on U.S. diesel exports.

The G7’s emergency large-scale reserve release, combined with the maintenance of smooth trade, is expected to jointly ease the diesel shortage, relieve cost pressures in transportation, agriculture, and manufacturing, alleviate immediate supply tightness through reserve releases, and reduce market fragmentation risk by forgoing an export ban. Both measures together improve expectations for fuel supply. Although the West has fully initiated emergency responses for energy supplies, leading to a brief cooling of energy inflation, whether energy inflation can continue a downward trend remains a major unknown. Investors are shifting their focus from crude oil barrels to refined product deliveries, major refinery utilization rates, and energy shipping efficiency, with policy effectiveness to be determined by real supply delivery.

French President Emmanuel Macron’s push for coordinated G7 reserve releases has escalated from plan discussions to action commitments; Trump subsequently made it clear that the U.S. would not impose a diesel export ban. This suite of oil supply policies addresses two major energy inflation pressures simultaneously—alleviating immediate oil supply shortages through reserve releases, and avoiding further fragmentation of U.S. and European diesel markets by maintaining cross-border trade. The G7 and its partners plan to coordinate the release of up to 100 million barrels of reserves within four months, focusing on a massive diesel release in the first 20 days and coordinating refinery maintenance, raising run rates where possible.

However, for investors, it's important to accurately distinguish—the latest development involves arrangements for crude oil and refined product reserves, not an increase in crude oil production capacity; officials have not clarified the final product allocation ratios.

"Europe has lots of diesel, and they will make a significant energy contribution to global supply—we will, too," Trump told reporters at the White House on Friday local time. "So, we will not implement an export ban."

This group, made up of major economies in Europe, North America, and Asia, after strong pressure from the Trump administration, agreed on Friday to release up to 100 million barrels of emergency crude oil and diesel reserves.

"I did request this of them, and we're going to get a lot of oil," Trump added. "They're doing a great job."

Trump made these remarks as trading prices for diesel and other refined products were experiencing record-breaking surges. Diesel provides core energy for a wide range of modern economy activities, including powering agricultural machinery, supporting the extensive U.S. transport sector, and supplying heating and electricity for rural communities.

Diesel is the lifeblood of transport and commercial activity, and due to its critical role, price increases have already spread throughout the economy, pushing up the costs of a variety of consumer goods—just as the U.S. midterm elections in November approach.

This presidential decision means he is backing away from previously considering restrictions on diesel exports and rejecting demands from some rural and Midwest Republicans facing tough elections. These officials had called for energy export restrictions to lower fuel prices that are causing voters severe strain ahead of elections.

On Friday, Trump insisted the diesel export ban was never seriously considered as an option. "We were never really planning to do that," he told reporters. “I don’t think we were.” However, last month the U.S. President stated he had encouraged advisers to support this measure.

Trump’s current approach also seeks a delicate balance between two core support bases: America’s agricultural heartland, where some incumbent Republican lawmakers face difficult reelections, and the oil interest groups benefiting from the President’s support of traditional fossil fuel policies, including giants like ExxonMobil and Chevron.

In recent weeks, several prominent Republicans—including Iowa Senator Chuck Grassley and Alaska Senator Dan Sullivan, who faces a tough reelection battle—have lobbied for export restrictions.

However, oil industry leaders and energy experts have again warned that restricting diesel exports may provide, at best, short-term price relief; subsequently, as domestic inventories swell and trigger U.S. producers and refiners to cut output, costs will quickly rise again.

Some government officials, including Energy Secretary Chris Wright and Interior Secretary Doug Burgum, have expressed similar concerns internally.

Heading into the midterm elections, the cost of fuel and other consumer goods is one of voters’ primary complaints. The surge in diesel prices has been especially notable, as wars in Russia and the Middle East have shut down some refineries and disrupted energy transportation.

According to the American Automobile Association, as of Friday, the average U.S. retail diesel price was $6.37 per gallon.

The reserve release operation announced Friday and coordinated by the International Energy Agency is expected to provide only short-term relief. President Emmanuel Macron of France said Friday that supplies would be delivered over the next four months, with an early focus on diesel.

Europe is highly reliant on U.S. diesel exports, and this reserve release is seen as a move to avoid a U.S. ban on fuel sales abroad. G7 members have now reaffirmed their commitment to “not impose export restrictions on energy or energy products” among member nations.

In the U.S., oil company executives have repeatedly urged Trump administration officials to consider alternative solutions and have warned that even a short-term export limit would lead to domestic production cuts and harm U.S. allies in Europe and Latin America.

According to a plan under serious consideration by the Trump administration, restrictions on the sale of red or dyed diesel would be lifted. This type of diesel is usually intended for off-road use and is long exempt from taxes. The proposal would allow retailers to sell dyed diesel exempt from the $0.24 per gallon federal excise tax for use in trucks and other highway vehicles.

Overall, the Trump administration is seriously considering relaxing restrictions on the sale and use of dyed diesel. This red-dyed diesel is mainly used for off-road operations and enjoys tax-exempt status. If implemented, retailers would be permitted to sell such diesel to trucks and highway vehicles while maintaining the $0.24 per gallon federal tax exemption.

100 million barrels launch a “diesel cooling war”—embargo threat recedes, oil prices rebound after intraday plunge

The G7 and its partners plan to coordinate the release of up to 100 million barrels of reserves within four months, focusing on heavy diesel deployment in the first 20 days, alongside coordinated refinery maintenance and increased run rates where possible.

Driven by this news, oil prices indeed saw a sharp correction on Friday, but this description is only accurate for intraday trading—the final settlement showed that prices rebounded strongly after an intraday crash. News of G7 coordinated reserves sent Brent crude briefly below $100 per barrel, which was followed by a significant recovery; in the end, Brent was nearly flat and WTI crude retained a distinct loss. Compared with the final trading day before the war broke out on February 28—February 27—energy prices remain significantly higher than prewar levels.

On October 2, benchmark international crude—Brent—settled at $102.25 per barrel, ending the day down 0.06% after rebounding from an intraday plunge below $100; WTI crude settled at $91.11 per barrel, down 1.90% on the day. Since the last trading day before the US-Iraq war broke out, Brent and WTI crude oil futures prices are up 41% and 36%, respectively.

On the supply side, Saudi Arabia is accelerating the restoration of its energy delivery capacity bypassing the Strait of Hormuz. According to media reports citing informed sources, the capacity of Saudi east-west pipelines is close to 6 million barrels per day, about 86% of their 7 million barrel design capacity; after domestic refiner demand on the west coast is deducted, about 4.5 million barrels are available for export. This restoration highlights transport capacity; actual available export flow is not equivalent to the already shipped export volumes. Yanbu port exports north to Europe via the Suez Canal, and south to Asia typically via the Bab-el-Mandeb Strait, so bypassing Hormuz does not mean the entire transport route is free from security constraints.

The Middle East situation remains one of “energy transport recovery, persistent military risk”: Energy shipments through Hormuz have increased, but some ships still travel with their identification signals off; the U.S. continues to deploy a third aircraft carrier and reinforcements, while Iran, maintaining indirect contact via Qatar, is preparing to escalate retaliation if it suffers another major attack.

With energy shipping through the Strait of Hormuz still facing military strikes and blockades, in the Bab-el-Mandeb direction, media has revealed that Saudi Arabia plans to support Yemeni forces in an offensive against the Houthis to improve Red Sea shipping safety, though no action has yet been taken. Meanwhile, media cited sources saying that later on Friday local time, a large crude tanker was hit by an unidentified projectile about four nautical miles east of Oman; crew members were unharmed.

Reserve releases open the energy cost relief valve, but long-term government bond markets are still recalibrating inflation and fiscal pressures

G7 coordinated reserves and the U.S. abandoning the diesel export ban provide dual support for easing global energy costs: supplying short-term relief and keeping cross-border trade flowing. Diesel is widely used in freight, agricultural machinery, and industrial activities, and its price changes affect corporate profits and consumer prices through transport and production costs. According to the International Energy Agency, Middle East crude exports have clearly recovered, but refined product supply remains severely constrained, with Russian refinery attacks exacerbating diesel shortages. Therefore, prioritizing diesel releases, coordinating refinery maintenance, and raising available capacity utilization more directly address current supply bottlenecks.

The positive effect of this coordinated policy round is winning time for refinery and transport system recovery. Up to 100 million barrels of reserves will be released within four months, with large diesel allocations in the first 20 days. However, market traders may focus more on the actual energy delivery speed, product mix, and whether follow-up supplies can continue in the Middle East and globally, rather than only using the announced total to estimate price declines.

Improved energy supply will help relieve inflationary pressures, but global financial markets’ long-term bond yields are still influenced by policy rate expectations, bond supply, and term premium. After Friday’s U.S. nonfarm payrolls report, the 10-year Treasury yield fell to about 5.157%, then rebounded to 5.281% by the New York close, actually rising about 4.7 basis points on the day; U.K. long-end bonds showed modest recovery. These latest signs indicate that national bond markets are still pricing based on their own inflation, fiscal, and monetary policy conditions.

From an investment perspective, improved diesel supply is first beneficial for transportation, agriculture, and manufacturing enterprises to control costs; for popular AI infrastructure companies in the semiconductor and AI compute power sectors, the positive impact could be further transmitted via eased inflation expectations, improved financing conditions, and a recovery in risk appetite. Lower energy costs create favorable conditions for valuation recovery, but the extent of actual recovery will still depend on trends in 10-year and longer term risk-free yields, credit spreads in bond markets, and the combined trajectory of earnings expectations for high-weight core companies related to AI computing power.