The United States backed away from the threat to halt fuel exports. The measure followed an agreement in which European countries agreed to release more diesel from their strategic stocks this Friday (2).
The decision was announced as US President Donald Trump tries to contain rising diesel prices for US industry and farmers, ahead of November's parliamentary elections, which will define control of Congress.
G7 leaders announced after a meeting on Friday that they will release 100 million barrels of crude oil and diesel, coordinated by the International Energy Agency (IEA), "in light of current market pressures."
In a joint statement, they did not detail the plan, but stated that the release will take place over four months, starting immediately, including a substantial volume of diesel reserves in the first 20 days.
The intervention will consider commitments already fulfilled under a pre-existing agreement for 400 million barrels signed in March — of which 325 million have already been released —, according to the IEA.
Three people familiar with the details said 40 million barrels will come from the U.S. Strategic Petroleum Reserve, Europe will contribute about 50 million barrels of diesel, and the rest will come from Asia.
The deal comes after Trump faced pressure from Republican lawmakers in the American agricultural heartland to impose a ban on exports to ease the plight of farmers ahead of next month's elections.
European negotiators and the American oil industry rushed to avoid the suspension, which would send global fuel prices soaring.
"We are not going to apply the embargo on exports," Trump declared to journalists on Friday, defining the European commitment to release diesel stocks as "a great thing."
"Europe has a lot of diesel and will make an important global contribution, just like us," he said. "We will have a lot of oil."
Two diplomats familiar with the negotiations said the White House had demanded that Europe release at least 100 million barrels, threatening to implement a ban on diesel exports if European countries did not comply with Washington's demand.
The joint statement included a commitment from signatories — including the US — to "refrain from restrictions on the export of energy and energy products between G7 countries, and call on all producers to avoid bans that could exacerbate market tensions."
Asked whether Washington had ruled out the embargo as part of the G7 release, the White House pointed to the commitment in the joint statement.
French President Emmanuel Macron said G7 members agreed "not to adopt any measures to restrict the exchange of oil and energy products between partner countries."
Diesel futures contracts in Europe extended losses after the announcement: the reference fell 8%, to US$ 1,337.75 a ton, the lowest level since the beginning of September. Wholesale diesel in New York fell nearly 2% to $4.56 a gallon.
G7 leaders said they "will meet within the IEA in the coming days to discuss the possibility of further releases of diesel as necessary."
The release represents a victory for the US oil industry, which lobbied hard against the embargo and encouraged the government to pressure allies to release stocks as an alternative.
"We support the administration's efforts to ensure a G7-coordinated release of 100 million barrels of crude and refined oil, as well as the commitment not to impose export restrictions between the parties," said Bethany Williams, spokeswoman for the American Petroleum Institute (API), an industry lobby group.
Macron said on Friday the release would send "a clear signal to the markets."
Previously, France proposed a plan in which Europe would release 50 million barrels of diesel and IEA countries would unlock another 50 million barrels of crude oil, according to diplomats.
In March, Europe committed to releasing 73 million barrels of refined fuels as part of a 400 million barrel strategic stockpile withdrawal coordinated by the IEA in response to the conflict in the Middle East.
The US has largely completed its portion of the program, but some European countries have not yet met their obligations, according to Fatih Birol, head of the IEA.
Diesel prices have been trading above $200 a barrel in the US, Europe and Asia for several weeks due to global refinery shocks including the war in Iran, Russia's conflict with Ukraine and China's decision to limit fuel exports.
