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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


EUROPE DIDN’T DELIVER. The Energy Report 09/30/2026

Ok Europe. It Is Time to step up. For years the US has carried the load for NATO to protect Europe and now some counties in Europe are hoarding diesel after years of energy policies that made them more dependent on Russia for their diesel exports. How did that work out for them? Now the US is putting another 40 million barrels of SPR crude on offer — the last U.S. slice of the March 172-million-barrel loan into a 400-million-barrel IEA deal — and telling Europe to stop sitting on diesel. And considering that Europe’s energy policies help create the global digital shortage it’s no wonder that the Trump administration is frustrated with some of the countries in the EU for not living up to their commitments.

Energy Secretary Chris Wright said the United States and Japan are delivering, but saying that “several European member countries have released only a fraction of the crude oil and petroleum products they pledged.” This is a particular problem because overnight Russia according to reports is confirming that it’s extending its diesel export ban through October creating a shortage in Europe which is being met in large part by U.S. oil exports.

Energy secretary Wright did not publish a country oil and diesel hoarders list yet Reuters mis reporting , citing two sources familiar with the White House effort, did. U.S. officials are particularly frustrated with France and Germany, believe they have fallen short of their March commitments, and have taken that complaint to the IEA.

And of course I’m sure that if the US did decide to do a diesel export ban France and Germany would be the first ones to complain. Germany is already on the record this week. The economy ministry says it will release stocks only if there is a physical shortage, not to cap prices, and that “no further releases are currently planned.” That is a public no to the diesel draw Washington wants. And if he doesn’t think there’s physical shortages maybe we should cut off diesel exports to Germany. OK I’m not really for that but it might send a message.

Back in June the same ministry said the vast majority of German crude and products were still in reserve after only a small first tranche hit the market. Germany’s pledge was 19.5 million barrels from the EBV public stockpile — the largest in the EU. France pledged 14.6 million barrels. There is no Paris delivery scorecard. Combined, those are the two biggest EU names in the deal, and the two Reuters says Washington is calling out. Still the IEA has not released a country-by-country “who delivered” table yet its clear according to Reuters that the US sees France and Germany as the focus of U.S. frustration. And this is the data according to the International Energy Agency. They said that the March IEA action pledged 426 million barrels — 400 announced, contributions came in higher. Mainy because the The United States put up 172.2 million in public crude through exchanges. Japan pledged 79.8 million, and Wright says Japan performed. Germany 19.5 million public. France 14.6 million. The UK 14.0 million from industry, 4.3 crude and 9.7 products. Spain 11.6 million in industry products only. Italy 10.0 million in industry products. The EU bloc was supposed to cover about 20 percent of the release. IEA’s Birol said this week that members have used about 20 percent of total emergency stocks, with 80 percent still in the pocket, and that about one-third of the 400 million has not even reached the market yet. S&P had Europe drawing only about 63 million barrels by July. That is the gap Wright is pointing at.

The US is living up to its commitment as they will put out an RFP to loan up to 40 million barrels from Big Hill and Bryan Mound. It is the last U.S. tranche of the 172. Bids are due October 6, with deliveries in November and December. This is an exchange, not a sale. The barrels come back with a premium — roughly 1.25 for 1, or about 20 to 25 percent extra.

Secretary Wright says taxpayers save more than $3 billion and the reserve gets refilled larger. The June offer of the same 40 million drew only about 500,000 barrels. Watch the bid. Critics will say the SPR is heading toward the lowest level since November 1982, with a routine floor around 252 million. The answer is emergency authority, a loan plus premium, and a refill in the coming months. Nice trade! Can I get in on that? And let’s face it right now we don’t have a oil shortage problem we have a diesel shortage problem the combination of refineries in Russia getting hit and the lack of lubricant oils coming from Iran because of the export ban is putting pressure on the administration is farmers and truckers are getting frustrated.

U.S. retail diesel is around $6.44, about $2.75 above a year ago. Harvest, trucking, midterms. The United States supplied about half of EU diesel imports in August. Europe holds large combined diesel stocks — analysts cite more than 350 million barrels If they ask which countries exactly, stay on-air safe: the Energy Secretary did not name them. Reuters, citing people familiar with the White House push, says U.S. officials are especially frustrated with France and Germany. Germany’s own ministry said this week there are no further releases planned except for a real shortage — not to bring prices down. That is the opposite of what Washington is asking for on diesel. Interior Secretary Doug Burgum put it in plain English: the Europeans have a lot of diesel reserves. Then EU Energy Commissioner Dan Jørgensen walked out of the ministers’ meeting and said… they talked about releasing the rest of the March pledge. Made no decision. Have to “balance price spikes against preserving stocks.”

That’s the whole play.

Washington’s read is simple — and a little weary. They want American diesel. They also want to keep their tanks full. We did our part. The U.S. and Japan showed up. Several European members released only a fraction of what they pledged after Hormuz blew up the market. Now cracks are screaming, midterms are coming, and Brussels wants more U.S. barrels while it sits on the stocks it already promised to put on the water. You can call it prudence. It sure looks like hoarding.

They want the product. They want the cushion. They want someone else to drain the tank.

Crude got knocked around yesterday and is trying to bounce this morning. WTI settled at $89.38 after opening near $93.50 and tagging $88.78, and overnight and early trade has it back toward $89.50 to $90.40. Products did not follow crude all the way down.

That is the story. The diesel crack is running again. Moscow just extended the producer diesel export ban through the end of October. Russia was the world’s number two diesel exporter, and that barrel is staying home. ULSD has been carrying a $110-plus crack versus WTI. Crude sold off. The refined barrel did not. That is how you get products gaining on a weaker crude tape.

The API report for the week ending September 25 was not friendly for crude and mixed for products. Crude inventories rose 1.019 million barrels when the Street wanted a draw of about 1.9 million. Gasoline built 2.99 million barrels. Distillates drew 286,000 barrels. Cushing built 2.08 million. So you have a crude build, a gasoline build, and another small distillate draw. That last number is the one that matters with a Russian diesel ban and winter coming. EIA drops at 10:30 Eastern. Watch crude against last week’s EIA build, watch Cushing, and watch whether official distillates confirm the API tightness. Fed speak yesterday was not a dovish parade. The one line the market grabbed was New York Fed President John Williams saying, “With the policy action we took at our September meeting, there is no need for urgency.” That helped metals that were in a free fall hit a bottom.

He still wants inflation back to 2 percent and still sees another hike before year-end. He called 3.7 percent inflation “unquestionably too high,” but he also mapped a path of about 3.5 percent this year, just above 2 percent next year, and 2 percent in 2028. That is “we already hiked, we can wait for the data.” That is not “we’re done.”

The rest of the room did not ease up. Governor Barr said further adjustments are “likely to be needed.” Chicago Fed President Goolsbee said letting inflation sit above target for five and a half years is “playing with fire.” Waller spoke on payments. Bowman spoke on bank cyber. So yes, one voter took the urgency out of the next hike. The committee did not take inflation off the table.

Today’s inflation and growth dump all hits before EIA. ADP is at 8:15 Eastern. At 8:30 we get August PCE, with headline around 3.7 percent year over year and core around 3.3 percent, and the monthly core print watched near 0.3 percent, along with personal income and spending and the third estimate of second-quarter GDP. Chicago PMI is at 9:45. EIA is at 10:30. Its going to be fun.

If PCE stays sticky, the Williams “no urgency” line gets a shorter shelf life and crude’s bounce has to live on geopolitics and the crack, not on easier money. If core cools, the dollar and yields give energy a tailwind. Diesel is already trading the physical squeeze, not the Fed.

Natural gas has pulled back as pipelines come back online, but Europe is in trouble on gas as well. Bloomberg reports Greek Prime Minister Kyriakos Mitsotakis is calling on the European Union to allow greater fiscal flexibility to help households and businesses squeezed by ballooning bills. Earlier this week the EU warned member states about a potential energy price crisis driven by the Middle East conflict, asking them to consider cutting demand and to keep filling gas storage ahead of winter.

European gas prices have more than doubled since the start of the U.S.-led war on Iran in late February, reaching their highest level since late 2022 earlier this month. Rising costs are at the top of the EU’s political agenda, with companies across the bloc blaming them for undermining competitiveness. That fight is set for the EU leaders summit on October 15 and 16.

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