Luxembourg, 29 October. European countries will release 42 million barrels of oil and oil products from strategic reserves over the next three months, half of it diesel, French Economy, Finance and Industry Minister Roland Lescure said ahead of a meeting of EU energy ministers; France’s share is 10 million barrels of diesel, which will start reaching the market in the coming days.
The French fuel from reserves will be sold at cost; Lescure estimates this will lower the price by 12–18 euro cents a litre, with the effect visible at the pump as early as next week. Distributors have been advised to advertise lower prices from 1 November, and small companies in remote areas will be offered interest-free loans. The mechanism is changing: previously the state lent strategic stocks to retailers, who bought them back a month later; now retailers will not have to replace the fuel they receive — a decision taken by French Prime Minister Sébastien Lecornu.
Per day, the European release amounts to about 460,000 barrels, 230,000 of them diesel. It is part of the G7’s October agreement to release up to 100 million barrels of oil and fuel over four months, which in turn counts towards the 400-million-barrel release coordinated by the International Energy Agency (IEA). The IEA describes the diesel shortage in its October report: in September global diesel exports were 700,000 barrels a day lower than a year earlier, as supplies from Russia and the Middle East fell by 1.3 million barrels a day and other exporters made up only part of it; the agency expects the tightness to last into 2027. Against this background, according to The Guardian, seven tankers carrying 288,000 tonnes of Russian diesel are sailing to the US.
What it means: The world market has run up not against a shortage of crude oil but against a shortage of refining: Europe is so short of diesel that it is opening its strategic stocks and selling them without profit.
Who benefits: European drivers, farmers and hauliers get cheaper diesel this winter. Exporters of oil products keep enjoying high diesel prices. For Kazakhstan, which mainly exports crude — CPC Blend via the CPC pipeline and KEBCO via the Transneft system — fuel shortages among neighbours and in Europe make plans to expand its own refining more attractive.
Background: Kazakhstan intends to raise refining at its three existing refineries from 18 to 39 million tonnes a year: the Shymkent refinery from 6 to 12 million tonnes by 2030, Pavlodar to 9 million tonnes and Atyrau from 5.5 to 6.7 million tonnes; a feasibility study for a new refinery of up to 10 million tonnes is also being prepared. Neighbours are already feeling the regional fuel shortage: in October Kyrgyzstan began receiving fuel from China by rail.
We have also reported that Kyrgyzstan began receiving fuel from China by rail and that Nalibayev and the head of CNPC discussed expanding the Shymkent refinery.
