Speed of Europe's diesel stock release in focus as IEA meets

By Robert Harvey, Canan Sevgili and Ahmad Ghaddar

LONDON/GDANSK, Oct 14 (Reuters) - The speed at which Europe plans to release its large diesel stocks will be the market focus when the International Energy Agency meets on Thursday, with analysts saying a rapid draw could push fuel prices lower but have little impact if spread over many months.

The price of diesel, which powers transport, agriculture and industry, has surged to record highs in many markets as supplies from Russia and the Middle East have fallen, threatening to push inflation and the cost of living higher and adding to pressure on governments.

The IEA's governing board will discuss the scale and timing of further stock releases after US President Donald Trump told European Union countries to draw down emergency inventories or face a potential US diesel export ban, as he seeks to lower prices ahead of the November 3 midterm elections.

"The key variable is the pace of the draw," said Abhishek Kumar, analyst at Sparta Commodities. "A 20- to 30-day release would represent a major intervention, while a draw spread over several months would have a relatively smaller impact."

A draw of 50 million barrels over 30 days could broadly offset the estimated loss of 1.6 million barrels per day of exports from Russia and the Middle East Gulf, Kumar added.

The IEA, which coordinates industrialised nations' releases of oil from emergency stocks during severe supply disruptions, launched a 400-million-barrel withdrawal in March in response to shortages caused by the US-Iran war. Since then, Russian diesel exports have collapsed due to Ukrainian attacks on oil refineries and self-imposed overseas sales restrictions.

RELEASES NEED TO BE MAINLY DIESEL, ANALYST SAYS

Last week, the IEA said accelerating previously announced releases could rapidly bring another 100 million barrels to market, raising questions over how much genuinely additional supply there could be.

"Material impact would only be achieved if the release is imminent and is mainly diesel," said Tamas Varga, an analyst at oil broker PVM. Markets would also want to know whether any release formed part of the original 400 million barrels or came on top of it, he added.

Europe holds significant emergency diesel inventories and remains a net importer of the fuel. Reuters reported this month that EU governments were discussing a French proposal for the release of 50 million barrels of diesel, alongside 50 million barrels of crude from IEA members.

The G7 subsequently announced a release of 100 million barrels in total.

The US said in September it would release the remaining 40 million barrels of crude under the March deal, with market analysts suggesting this could be included in Thursday's agreement.

IEA chief Fatih Birol on Sunday urged all members to assess whether additional diesel releases would be necessary. Diesel accounts for almost a fifth of the IEA's publicly held emergency stocks.

EU IMPORTS OF DIESEL AND GASOIL FALL IN 2026

EU diesel and gasoil imports between March and September fell by 390,000 barrels per day, according to data intelligence firm Kpler.

Spread over four months, the release of 50 million barrels of diesel would provide roughly 400,000 bpd according to Reuters calculations, broadly matching the decline in imports.

However, any release would need to be balanced with EU rules that require emergency stocks to cover at least 90 days of net imports or 61 days of consumption, whichever is greater.

The refining margin for European benchmark diesel futures - or the premium to underlying Brent crude futures - was around $85 per barrel on Wednesday, down from an all-time high of close to $95 per barrel in late September.

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(Reporting by Robert Harvey and Ahmad Ghaddar in London, and Canan Sevgili in Gdansk. Editing by Alex Lawler, Dmitry Zhdannikov and Kirsten Donovan)