The International Energy Agency agreed, on Wednesday, to accelerate the release of oil stocks announced in March, giving priority to diesel stocks, in an attempt to ease the supply crisis and high fuel prices resulting from the war with Iran and disruptions in the movement of tankers and refineries.
The agency said that the governments of member states expressed their support for accelerating the releases that were announced as part of the collective action in March, with the aim of completing them as quickly as possible, while they also supported prioritizing the release of diesel stocks, within the limits permitted by circumstances, given the current pressures on its markets.
Fatih Birol, Executive Director of the International Energy Agency, said that member states supported accelerating the release of stocks that was announced in March, and also supported giving priority to diesel in light of the tight market.
The agency explained that about 100 million barrels of the quantities that member states pledged to offer within the framework of the March initiative have not yet reached the markets, but it did not specify the volume of crude oil versus diesel within these quantities.
In March, the International Energy Agency launched a program to release 400 million barrels of stockpiles to confront supply shortages and rising prices resulting from the war with Iran, but a portion of these quantities has not yet reached the market.
Member states are scheduled to review the release plans during a meeting of the agency's board of directors next week.
Not necessarily a new quantity
The size of the new quantities that will reach the market is still unclear. JPMorgan analysts said that the G7 announcement last week appears to be aimed largely at accelerating the delivery of quantities previously pledged within the March program, and not at launching a new intervention of 100 million barrels.
On Friday, the G7 countries announced plans to release 100 million barrels of crude oil and diesel, in a move that raised expectations about further withdrawals from strategic stockpiles.
The German Ministry of Economy said that it is working to approve the release of its stocks within the framework of the March plan, explaining that Germany will participate in releasing the quantities previously specified by the International Energy Agency in March, without indicating new additional quantities.
The governments of member states of the International Energy Agency currently maintain emergency oil stocks equivalent to about 1.1 billion barrels, including more than 200 million barrels of diesel.
Oil is falling
In oil markets, prices fell at settlement on Wednesday after a volatile session, as the International Energy Agency’s announcement reduced fears of supply shortages, while investors continued to monitor geopolitical risks and production disruptions.
Brent crude fell 38 cents, or 0.38 percent, to $100.20 per barrel at settlement, while US West Texas Intermediate crude fell $1.16, or 1.3 percent, to $88.28.
In the United States, Energy Information Administration data showed a decrease in crude inventories by 3.2 million barrels during the week ending October 2, to 424.1 million barrels, contrary to analysts’ expectations of a rise of 1.7 million barrels.
But fears of continued supply disruptions kept upward pressure on prices, with risks mounting in the Middle East and Ukraine. Analysts said investors are still not convinced that the recent increase in supplies and exports from the Middle East is sustainable.
In Europe, France Info radio reported that France would release 10 million barrels of diesel from its strategic reserves, citing unnamed sources.
These developments coincided with fears of the impact of a storm forming in the Gulf of Mexico on US oil and gas facilities, while analysts said that potential production and refining disruptions come at a time when fuel markets are already suffering from pressure due to the loss of part of the refining capacity in the Middle East.
While the minutes of the Federal Reserve meeting showed a division regarding the extent of the need to continue raising interest rates to confront the risks of inflation, US President Donald Trump escalated his calls to reduce them, in a confrontation that reflects the discrepancy between the central bank’s directions and the pressures of the White House.
The minutes of the US Federal Reserve's meeting on September 15 and 16, which were released on Wednesday, revealed that bank officials disagreed on the motives for raising interest by a quarter of a percentage point, despite their unanimous vote on the decision.
Some participants believed that raising interest was necessary to prevent energy shocks and other price shocks from affecting inflation on a broader scale, while others considered that tightening monetary policy was required to confront the risks of inflation led by strong demand.
The minutes indicated that “many participants” believed that adopting a higher path for interest rates would be appropriate from a risk management perspective, as it provides protection in the event that inflation remains high for a longer period than expected, whether as a result of strong demand or more supply shocks.
On the other hand, others saw that the higher interest level approved in September was important to limit the transmission of energy and other shocks to prices on a broader scale, while “two” participants attributed their support for the increase to their assessment that the neutral interest rate level was higher than previously thought.
The minutes said that “several participants” considered that the current interest level was not restrictive of economic activity, or that it was only restrictive to a slight degree. Most participants also felt that another hike in the federal funds rate range would likely be appropriate before the end of the year.
Market movements indicate that investors currently expect the Federal Reserve to keep the interest rate in a range between 3.75 and 4.00 percent during its meeting scheduled for October 27 and 28, after their bets on a successive interest rate hike declined. On the other hand, the markets still expect another hike at the December meeting.
This comes after the release of weaker-than-expected data on jobs and inflation, which strengthened expectations that Fed officials will give economic data more time to determine whether price pressures are declining, or whether core inflation has become more established at levels that are more than a percentage point higher than the bank’s target of 2 percent.
But the disagreement that emerged at the September meeting remains, as some policymakers believe that a faster pace of rate hikes may be necessary, opening the door to a more intense debate and possibly a split vote during the October meeting.
Trump pressure
On the other hand, Trump renewed his pressure on the Federal Reserve to lower interest rates, saying on Wednesday, in response to a question about mortgage rates, that the Federal Reserve “wants to see the country get worse.”
Trump said that Fed Chairman Kevin Warsh is “awesome,” but added that the rest of the Fed “want the country to get worse, in my opinion,” because he believes interest rates should go down.
Trump's statements come at a time when the 30-year mortgage rate rose last week to its highest level in about three years, adding another dimension to the political pressures calling for easing monetary policy.
US Treasury Secretary Scott Besent, who was next to Trump in the Oval Office, said that inflation is high due to the “energy shock,” expecting that the end of the conflict with Iran will lead to improved energy supplies.
Besant added that the energy market “will be well supplied” after overcoming the repercussions of the conflict, allowing inflation to move towards the Fed’s target. He also expected a decline in mortgage rates and the 10-year Treasury bond yield.
