100 Million Barrels Shrinkage? Reports Say EU Believes Oil Reserve Release Plan Mainly Fulfills Previous Commitments, Not New Quotas

The International Energy Agency (IEA) and European Union member states held discussions on Wednesday about releasing strategic reserves of oil and diesel. The market is closely watching how much additional supply the Group of Seven (G7)'s plan to release up to 100 million barrels, announced last week, can actually provide.

EU member states generally believe that this action will largely fulfill the commitment made in March this year to release reserves, rather than involve an extra 100 million barrels of new oil stock releases.

According to media reports, IEA member countries held an emergency meeting on Wednesday afternoon to discuss speeding up the implementation of the strategic oil reserves release plan announced in March. After the meeting, the IEA stated that member countries support "accelerating the release of oil stocks announced in March," and support "prioritizing the release of diesel stocks where possible."

Meanwhile, the EU Energy Working Group also held a conference call on Wednesday to further discuss the release arrangements agreed by G7 last week. EU officials generally believe that any further releases should be kept within the scale already determined in March. Some member states want the IEA to first assess the potential market impact of the release.

Diesel prices have surged recently as the Iran war and attacks on Russian refineries have disrupted refining and transportation activities, pushing up fuel costs and in turn increasing pressure on sectors such as transport and agriculture, as well as inflation.

G7 Announces 100 Million Barrel Release, but Actual New Supply Remains Unclear

The G7 member countries agreed last Friday to release up to 100 million barrels of crude oil and diesel reserves. This initiative was previously pushed by U.S. President Trump. The U.S. government had warned that if European countries did not take more measures to lower diesel prices, the United States might restrict diesel exports.

However, it is still unclear how much of the 100 million barrels actually constitutes genuinely new supply to the market.

In March of this year, the IEA had announced a record 400 million barrel strategic oil reserve release plan to address rising crude oil prices and supply disruptions. By last Friday, IEA data showed that about 325 million barrels had already been released, with about 75 million barrels still pending release.

Two EU diplomats said that EU countries expect that the remaining approximately 75 million barrels yet to be released will be counted toward the 100 million barrels announced by G7 last week.

Analysts at JPMorgan have made a similar judgment. The bank believes that the “100 million barrels” mentioned in last week’s G7 statement does not mean the market will receive 100 million barrels of entirely new strategic reserve supply; a significant portion will actually fulfill commitments already made in March.

EU Prioritizes Fulfilling Previous Commitments

The EU is currently inclined to proceed with this action within the set scale determined in March.

An internal EU document shows that after discussions on Wednesday morning, EU officials broadly agreed that any further strategic oil reserve releases should remain within the size agreed upon in March. Previously, only about half of the EU's March commitment had been released.

As for the priority release of diesel reserves emphasized in last week's G7 agreement, EU member states believe it can be implemented, but the scale may be limited. No EU country has clearly committed to an additional release of diesel reserves within the 20-day window.

France and Italy may consider further releasing a portion of diesel reserves on top of their March commitments, but no final decision has been made yet.

The German Ministry of Economic Affairs stated that Germany will participate in the further release as determined by the IEA in March, but did not announce any new release scale.

Polish Energy Minister Miłosz Motyka said on Wednesday that Poland is ready to release oil and diesel reserves if a consensus is reached, but expects the IEA will not make a final decision that day.

IEA Still Holds Over 1.1 Billion Barrels in Inventory

The IEA stated that its members still hold oil inventories equivalent to approximately 1.1 billion barrels of crude oil, including over 200 million barrels of diesel reserves.

This means that despite significant uncertainty about the actual scale of the new supply resulting from this release plan, IEA member states still have substantial strategic stocks to intervene in case of further supply shocks.

One of the main focuses of this reserve release is diesel. Due to the Iran war, attacks on Russian refineries, and disruptions to oil tanker transport, diesel prices have recently reached record levels, putting cost pressure on sectors such as trucking and agriculture.

Europe previously indicated that there is currently no risk of fuel supply shortages, but the rise in diesel prices has developed into a clear price pressure.