Oil prices fell sharply Friday as expectations that additional fuel and crude reserves could be released helped ease concerns about tightening energy supplies.
Brent crude declined $2.83, or 2.77%, to $99.48 a barrel at 0842 GMT. U.S. West Texas Intermediate crude fell $3.35, or 3.61%, to $89.52 a barrel. European gasoil futures, a benchmark for diesel prices, dropped more than 5% to $1,377 a metric ton.
The declines came after reports that governments were considering further releases from emergency fuel reserves. The possibility of adding diesel and crude to the market offered some relief following sharp increases in energy prices caused by supply disruptions and uncertainty related to the Middle East.
Brent was on track for a weekly decline of about 4.7%, while WTI was down around 3.1% for the week.
European Union governments discussed a French proposal to release 50 million barrels of diesel. The plan would also ask members of the International Energy Agency to release 50 million barrels of crude oil.
The discussions followed pressure from the United States for European countries to make more diesel available as governments work to reduce rapidly rising fuel prices. The talks also took place amid concerns that Washington could potentially limit diesel exports.
Ole Hansen, head of commodity strategy at Saxo Bank, said gasoil and ultra-low-sulfur diesel were driving the energy market lower as European nations considered releasing fuel and crude reserves.
According to Hansen, the primary source of pressure in energy markets had moved away from crude availability as Middle East flows recovered. Refined products, however, were facing tighter supplies because refinery capacity and production had fallen across the Middle East and Russia.
China’s decision to suspend oil product exports for October has added further pressure to fuel markets. Beijing made the move as it sought to maintain domestic stockpiles.
Oil prices had closed higher in the previous session following reports of the Chinese export suspension. Uncertainty also continued over developments involving the United States and Iran.
Barclays said oil flows through the Middle East Gulf had recently recovered more quickly, including through pipeline bypass routes.
With crude flows improving and emergency stock releases under consideration, market attention has increasingly shifted toward the availability of refined fuels, particularly diesel.
The developments matter to consumers and businesses because diesel costs affect transportation, logistics, agriculture and other operating expenses.
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