Brent Tops $100 as China Reportedly Halts Fuel Exports, US Eyes EU Diesel

Brent crude rose back above $100 a barrel on Thursday, reversing earlier losses, following a Reuters report that Chinese refiners had suspended fuel exports to destinations other than Hong Kong and Macau, CNBC reported. Four people briefed on the matter told Reuters of the suspension, and three of them said state-owned PetroChina had cancelled a handful of gasoline and jet fuel cargoes planned for October. The move adds pressure on fuel markets already strained by the Iran war, and comes as Washington presses France and Germany to release emergency diesel stocks, according to Reuters.

Brent for December delivery was last seen up 2.4% at $100.36, having earlier traded 1% lower, while US West Texas Intermediate rose 2.5% to $92.70, CNBC reported. Euronews also put Brent just above $100 during European trading, and said investors were weighing a recovery in Gulf crude shipments against the lack of a US-Iran deal.

Beijing prioritises domestic supply

China began its week-long National Day holiday on Thursday without giving major refiners the green light to export oil products to regions outside Hong Kong and Macau in October, the sources told Reuters. Three of them said PetroChina cancelled the shipments on Wednesday and had committed to most of these cargoes in the past two weeks. Zhejiang Petrochemical, a large privately controlled refiner, did not schedule any oil product shipments during the holiday week, a fourth source said.

It is not clear whether Beijing will resume permitting exports after the holiday ends on 7 October, the sources said, adding that it could depend on domestic fuel inventories and refining output. PetroChina, Zhejiang Petrochemical and China’s National Development and Reform Commission did not immediately respond to Reuters’ requests for comment during the holiday.

This is not the first time this year that China has curbed fuel exports. Beijing restricted them in March after the outbreak of the Iran war disrupted Middle Eastern crude supplies, then relaxed the curbs in July and has since managed shipments on a monthly basis, Reuters reported. OilPrice.com reported that Chinese fuel exports rose sharply between July and September. Last week, GL Consulting, a consultancy owned by MySteel, said October exports could be lower because Chinese gasoline and diesel inventories were at seven-year lows, according to OilPrice.com.

Asian diesel refining margins rebounded to around $75 a barrel, the highest in a week, Reuters reported.

Washington turns to Europe’s diesel reserves

The Trump administration has told Germany and France to draw down emergency diesel inventories to help ease global fuel prices or face a potential US diesel export ban, three people close to the discussions told Reuters. A source based in a European capital said the US had asked the EU to release 120 million barrels of diesel over the next six months.

US Energy Secretary Chris Wright told reporters on Wednesday that he expected announcements soon from Europe about new diesel supplies. “We’ve lost some diesel exports from the Middle East, although we’re restoring those, and we’ve lost diesel exports from China,” he said, according to Reuters. An EU official told Reuters that the European Commission, Germany, France, Italy, Ireland and Britain were holding a call on Thursday to discuss the possible need to release diesel stocks. France’s energy ministry declined to comment, and Germany’s economy ministry did not respond immediately to a request for comment.

POLITICO reported earlier this week that oil industry executives and White House energy advisers were pitching ideas to bring down diesel prices, including asking European governments to release diesel from their strategic reserves, in a bid to persuade Trump not to impose an outright export ban. “The motivation is to stop a ban,” one oil industry executive told the outlet. Reuters reported that Trump is considering a potential diesel export ban to bring down US fuel prices ahead of November’s midterm elections.

Wider market jitters

European shares fell on Thursday as investors weighed faster-than-expected September inflation in Germany, France and Italy, which Euronews said was driven by the energy shock. The 10-year US Treasury yield touched 5.3%, its highest since 2007, according to Euronews.

There were also signs of easing elsewhere. Euronews reported that crude exports from the Gulf have climbed back close to pre-war levels and that Saudi Arabia has partly restored its East-West pipeline, which bypasses the Strait of Hormuz.

What happens next

Traders will be watching for any decision from Beijing after 7 October, any European move on diesel stocks and whether the US goes ahead with a diesel export ban. OPEC+ is expected to keep November output targets unchanged when it meets on Sunday, according to delegates cited by Bloomberg. Progress, or the lack of it, in US-Iran talks on reopening the Strait of Hormuz could also move prices.