JPMorgan's commodities research team is cautioning that last Friday's Group of Seven pledge to release 100 million barrels of crude and diesel from emergency stocks over four months — announced amid record diesel prices — involves far less new supply than the headline number suggests.

In a note published this week titled “Counted but not delivered,” strategist Natasha Kaneva and colleagues argue that the package explicitly counts previously fulfilled commitments and, in their reading, “does not represent 100 million barrels of new intervention.” The distinction matters because only barrels that physically leave storage add to the supply actually available to the market.

The arithmetic behind the bank's view: members of the International Energy Agency (IEA), which coordinates emergency stock releases among oil-importing countries, committed 412 million barrels in March, of which about 321 million have already been delivered, leaving roughly 91 million outstanding. Much of Friday's announcement therefore amounts to completing the March release, including the remaining 40 million barrels from the US Strategic Petroleum Reserve (SPR), the country's emergency crude stockpile, that are already scheduled through December. What is genuinely new, according to the note, is the tilt toward diesel — the workhorse fuel for freight, farming and heavy industry — with deliveries heavily front-loaded in the first 20 days.

Key parameters remain unresolved. The G7 did not specify how the release splits between crude and refined products, or which countries are contributing; earlier talks centered on a 50/50 split. That composition is more than a technicality, since crude and finished fuels serve different parts of the energy system. Details are expected at the IEA governing board meeting on October 14–15.

Europe is the report's focal point:

• European countries committed 108 million barrels in March (34 million crude, 73 million products)
• JPMorgan estimates only about 16 million barrels of diesel, 17 million of gasoline, 10 million of fuel oil and 12 million of other products have actually been released
• Little or no European crude appears to have been released
• Europe holds roughly 377 million barrels of emergency diesel, than triple the 106 million held by the US
• Germany (64 million) and France (61 million) alone outnumber the entire US stockpile
• Europe and the US have each released only about 16 million barrels of diesel since the war began

Meanwhile, the US has been doing the heavy lifting through the transatlantic arbitrage trade, in which cargoes cross the Atlantic to capture price differences between the two markets. US diesel shipments to Europe rose from 200,000–250,000 barrels per day (bpd) before the war to around 400,000 bpd in July and nearly 500,000 bpd in August, draining American inventories.

On global oil stocks, a full release would take inventories from about 7.9 billion barrels to 7.8 billion by January — a decade low, but still roughly 150 million barrels above JPMorgan's stress threshold, the level below which the bank deems inventories stressed. Diesel is tighter: OECD diesel inventories would fall to about 504 million barrels, a two-decade low and below the bank's 529 million-barrel stress level. That equates to roughly 39 days of demand cover — a measure of how long current consumption could be met from existing stocks — slightly below the September 2022 low of 40 days.

If Europe takes on about 40 million barrels of the diesel release and spreads it over 60 days, that works out to roughly 660,000 bpd — equal to about 57% of Europe's current diesel imports. That should ease prompt tightness and narrow the arbitrage, according to the bank.

The note closes with the line: “the constraint is not the availability of emergency barrels, but governments' willingness to deploy them.”

Update: Trump said a “big announcement” on diesel is coming, hinting at the October 14–15 meeting.

Source: InvestingLive (ForexLive)