The G7 countries agree to withdraw 100 million barrels from emergency reserves, and Japan rules out additional participation

A European Commission spokesman said on Monday that the decision of the G7 countries to withdraw 100 million barrels of diesel and crude oil from emergency reserves will have a positive impact on oil prices in European Union countries.

The spokesman added to reporters in Brussels that despite this step, the European Union still appears to be heading for a “very difficult winter” with regard to energy prices.

The G7 countries agreed on Friday evening to withdraw 100 million barrels of diesel and crude oil from emergency reserves, in a move welcomed by US President Donald Trump in light of his efforts to calm the sharp rise in fuel prices related to the war with Iran.

The conflict sparked the largest withdrawal of emergency stockpiles in history, coordinated by the International Energy Agency in March.

The G7 said in a joint statement at the time: “Taking into account the commitments that have already been fulfilled, we will implement our commitments through a coordinated withdrawal through the International Energy Agency of 100 million barrels.”

She added that the process will begin immediately and will last four months, with a large and early withdrawal of diesel within 20 days by the G7 countries and their partners.

The statement did not specify a distribution of the quantities of crude oil, diesel, and other products scheduled to be withdrawn, nor did it mention the countries that would participate.

The statement added: “We will meet within the framework of the International Energy Agency in the coming days to discuss the possibility of conducting additional operations to withdraw (from) diesel reserves as necessary.”

Trump wrote in a post on the Truth Social platform after the decision: “Europe has just agreed to withdraw a massive amount of its huge stockpile of diesel fuel. The process will begin immediately.”

The US President seeks to reduce domestic fuel prices before the midterm elections on November 3.

He told reporters at the White House, before leaving for Alabama, that the United States would not impose a ban on diesel exports. He pointed out that this plan was not seriously proposed in the first place, even though he repeatedly stated during the past two weeks that imposing such a ban was under study, and that he supports the idea.

Trump added: “Europe has a large stock of diesel, and it will make a major global contribution, and so will we and so will we.” “We will not impose an export ban, but we will do what we have to do.”

In March, the Iran war led to the largest withdrawal of emergency stocks ever, as countries withdrew 400 million barrels, coordinated by the International Energy Agency.

Reuters quoted three informed sources on Thursday as saying that the Trump administration had previously informed Germany and France of the need to withdraw from emergency diesel stocks, otherwise they would face a possible US ban on its exports.

The G7 statement said that member states will refrain from imposing restrictions on exports of energy products among themselves.

Deputy Governor of the Bank of Japan, Shinichi Uchida, said that the global artificial intelligence boom may have contributed to facilitating financial conditions by enhancing demand and raising asset prices, but at the same time it carries the risk of a correction in the markets if the profits that investors expect are not achieved, at a time when the bank is monitoring the impact of investment in technology on inflation and interest rates.

In the text of a speech published by the central bank on its website, Monday, Uchida described the global spread of artificial intelligence as a “major positive shock to demand,” explaining that it imposed upward pressure on the economy and prices. Technology can also increase productivity and enhance capital accumulation, which may ultimately affect the economy's natural interest rate, a level that neither stimulates nor constrains economic activity, he said. He added: “Initially, it seems that the demand side came first and made financial conditions more accommodating in the end,” but he warned of “the risk of a correction if profits do not meet expectations.”

Uchida's statements come at a time when global stock markets, including Japan, are witnessing a strong rise in shares of artificial intelligence and semiconductor companies. The Nikkei index closed on Monday at its highest level in three months, supported mainly by gains in chip-related companies.

The Bank of Japan believes that the impact of the artificial intelligence boom is not limited to stock markets, as huge investments in data centers, chips and digital infrastructure provide a boost to demand, which may add pressure to the economy and prices. In contrast, Uchida noted the opposite effect in debt markets. While rising AI-related stock prices have eased financial conditions, massive bond issuances by companies linked to the sector have put upward pressure on long-term interest rates. This point is of particular importance for Japan, as the yield on 30-year government bonds reached a record level of 4.235 percent on Monday, amid a combination of concerns related to inflation, public finances, and the direction of interest rates.

Uchida stressed that the bank will continue to carefully study economic and financial data to reach a “consistent picture” regarding the impact of artificial intelligence, noting that it is still difficult to determine the overall impact of the technological boom on the natural interest rate in Japan. The Bank of Japan has identified the strength of demand related to artificial intelligence among the factors that could push core inflation to exceed its 2 percent target, which may require further monetary tightening.

The bank raised interest rates in June and then September, as the energy price shock resulting from the war in Iran added to inflationary pressures resulting from a weak yen, which increases the cost of imports.

Japan is particularly exposed to energy fluctuations, given its almost complete dependence on crude oil imports, most of which came from the Middle East before the closure of the Strait of Hormuz. Uchida's statements reveal that artificial intelligence has become a new element in the Japanese monetary policy equation. The investment boom may raise productivity and economic energy in the future, but at the current stage it enhances demand and asset prices and may add to inflation, which supports the justifications for the Bank of Japan continuing to normalize its monetary policy. At the same time, the bank remains wary of the other side of the boom, as high stock valuations are based on strong expectations for profit growth. If companies are unable to transform huge investments in artificial intelligence into actual returns, the markets may face a correction that reflects part of the financial easing brought about by the boom over the past period.

On Monday, Japan ruled out implementing a new process of withdrawing from its national reserves of crude oil at the present time, stressing that it had already pumped quantities of its reserves during the past months, despite the agreement of the “Group of Seven” countries to release 100 million barrels of diesel and crude oil from emergency reserves to confront energy market turmoil and high fuel prices.

Japanese Chief Cabinet Secretary, Minoru Kihara, said that Tokyo is not currently planning to release additional quantities, explaining that Japan has been participating in internationally coordinated withdrawals for some time. He added in a press conference: “Japan has been releasing oil from reserves for some time, and there are no plans at this stage to implement an additional release process.”

Kihara's statements come after the G7 countries agreed, on Friday, to release 100 million barrels of diesel and crude oil from emergency stocks, in addition to pledging to refrain from imposing restrictions on energy exports.

The agreement came after pressure exerted by US President Donald Trump on the European Union to withdraw from emergency diesel stocks, amid a sharp rise in fuel prices and fears of a shortage of refined petroleum products.

It is still unclear the size of the quantities that will be counted within the new operation from the remaining stocks from a previous plan approved by the 32 member states of the International Energy Agency in March, which included the release of 400 million barrels of oil to alleviate supply disruptions resulting from the US-Israeli war on Iran.

The Executive Director of the International Energy Agency, Fatih Birol, said last week that member states have already released about two-thirds of the amount agreed upon within the 400 million barrels plan. Japan participated strongly in that response, as it announced in March the release of about 80 million barrels of its oil reserves as part of a coordinated action, before implementing a second round of withdrawal from the national crude oil reserve in May.

The size of these quantities explains Tokyo's current conservative stance towards implementing a new operation, at a time when governments are seeking to achieve a balance between calming energy prices and maintaining sufficient levels of emergency reserves in light of continuing geopolitical risks.

Kihara said that the recent G7 meeting came amid delays in the release of European strategic reserves and growing concern about the sharp rise in global diesel prices. He added that the discussions focused in particular on the measures necessary to address diesel prices in Europe, the United States and other regions.

The diesel crisis is gaining increasing importance in energy markets, with continued pressure on refining capabilities and global supplies.

Europe had entered into extensive consultations regarding the use of its reserves, while the European Union warned against imposing US restrictions on diesel exports, and called for collective and coordinated action.

Japan's position indicates that the G7 agreement does not necessarily mean that all members are committed to implementing new withdrawals from their national reserves, especially countries that have already made significant contributions to previous moves.

As oil and diesel prices continue to fluctuate, attention will remain on how to distribute the quantities agreed upon between members of the G7 and the International Energy Agency, and the extent to which the release of reserves can ease price pressures without depleting the strategic reserves necessary to confront any new supply disruptions.