G7 releases 100 million barrels of oil. Will it bring fuel prices down? | DW News

The US strategic petroleum reserve was never meant to be a gas station to be tapped whenever a POTUS wants to score a few political points. Yet that is exactly what successive Presidents have used it as. The underground salt caverns where the US stores its strategic reserves have seriously been degraded and eroded by the frequent withdrawal and refilling that has happened. In fact, the US must earnestly consider building above ground petroleum reserves to replace the natural ones used currently. Doing so would be extremely costly and take quite some time, but it is unavoidable.

From the Internet :<br>------<br>Brent Crude Returns to $100, European and U.S. Treasury Yields Continue to Rise, U.S. Pressures France and Germany to Release 120 Million Barrels of Diesel Reserves: How Should We View the Current Market Situation?<br>
<br>First, Rubio directly expelled the Iranian delegation. Then, he announced the resumption of hostilities following preparations for the midterm elections and dispatched a new aircraft carrier to the Middle East. Subsequently, he called on Europe to release its diesel reserves. Within just two days, the Trump administration made three major moves, effectively declaring the formal collapse of the latest round of U.S.-Iran negotiations.<br>
<br>Logically, oil prices should have skyrocketed after the negotiations broke down. However, after the U.S. called on Europe to release strategic reserves, France responded positively and is expected to push the EU to release 50 million barrels of diesel. Consequently, oil prices fell instead of rising, with Brent crude dropping back below the $100 mark.<br>
<br>However, if Europe could truly suppress oil prices simply by releasing reserves, they would have done so long ago. In fact, Europe&#39;s deindustrialization is already a burning issue, yet they still waited until Trump demanded oil before releasing it. This indicates that Europe is fully aware that this small amount of oil is merely a drop in the bucket and is fundamentally incapable of driving oil prices down.<br>
<br>As for a recent heavyweight analysis by JPMorgan claiming that Middle Eastern crude oil exports have recovered to 89% of pre-war levels, reaching 20.5 million barrels per day, this is nothing short of willfully ignoring reality. Smuggling has been occurring since the very beginning of the war. Currently, large vessels dare not pass through the Strait of Hormuz and must rely on small boats for smuggling, a situation even worse than in April. How could shipping capacity possibly surge under these conditions?<br>
<br>Judging by the current state of the conflict, although the Houthi forces have not completely severed the Bab el-Mandeb Strait, they have clearly obstructed exports from Saudi Arabia&#39;s Yanbu port. The oil export channels of countries along the Persian Gulf coast are essentially cut off, with virtually no possibility of a short-term recovery.<br>
<br>Although Iran currently holds the upper hand, it lacks the capability to execute precision strikes against the U.S. Navy. Therefore, relying on military force to break the U.S. blockade of the Strait of Hormuz is clearly unrealistic.<br>
<br>While the U.S. has deployed another aircraft carrier to the Middle East, following the principle of waning momentum (where the first effort is strongest, the second is weaker, and the third is exhausted), the intensity of this U.S. strike is likely to be weaker than previous ones. Thus, it is highly unrealistic for the U.S. to force Iran into submission through military means.<br>
<br>Economically, although Iran&#39;s inflation has skyrocketed, the country maintains a very high rate of grain self-sufficiency. No matter how dire the economy becomes, it has not reached the point of mass starvation. Therefore, Iran is still far from being pushed to the breaking point.<br>
<br>Conversely, the U.S. is also grappling with severe inflation and soaring government bond yields, making its overall economic situation naturally very weak. However, the U.S. is certainly not yet at the point where it cannot spare a few ships to cause trouble in the Middle East.<br>
<br>It is evident that both the U.S. and Iran have pushed each other to the brink of collapse, yet neither side has reached the point of being forced to yield. Consequently, it is difficult to expect any significant shift in the conflict in the short term.<br>
<br>Regarding negotiations, because Trump tore up the Memorandum of Understanding, Iran has raised its demands, insisting on compliance before resuming navigation. Furthermore, following this round of negotiations leveraging the UN General Assembly session, the trust of Iranian moderates in the U.S. appears to have significantly diminished, reducing the likelihood of an Iranian compromise to an extremely low level.<br>
<br>Looking at the U.S. side, with government bond yields having surged dramatically, U.S. fiscal spending is already under severe strain. If the U.S. were to meet Iran&#39;s demands at this juncture, the market would likely become even more bearish on U.S. Treasuries. Therefore, the possibility of a U.S. compromise is also shrinking rapidly.<br>
<br>Thus, both the U.S. and Iran remain in a stalemate where neither can win nor afford to lose, and this dynamic is only intensifying. Mutual trust between the two sides has been utterly shattered, making the prospect of successful future negotiations exceedingly slim.<br>
<br>Under such a stalemate, the possibility of oil prices continuing to decline in the short term is virtually non-existent. However, whether trading Brent or WTI, these are futures contracts, not spot commodities. Before delivery, prices are subject to speculative manipulation.<br>
<br>Looking at the trend over the past few months, futures delivery occurs on the 22nd of each month. After delivery, the probability of oil prices falling is relatively high, but this trend typically ends in the first ten days of the following month, with prices inevitably converging toward spot levels by mid-month. Therefore, we can expect this round of short-selling to last at most through the early October holiday period (China&#39;s National Day), after which prices should rebound.<br>------<br>Also from the Internet :<br>------<br>According to September data, Saudi Arabia is capable of exporting 5.4 to 6 million barrels of oil per day.<br>
<br>In fact, it’s not just Saudi Arabia; the entire Gulf region is exporting oil to help alleviate the global energy crisis.<br>
<br>Some might ask, &quot;Wait a minute, isn&#39;t that wrong? Saudi Arabia&#39;s eastern export route, the Strait of Hormuz, is blocked by Iran, and its western export route, the Port of Yanbu, is blocked by the Houthis. How can they possibly export oil?&quot;<br>
<br>This reflects a misunderstanding of international politics, falling into the cognitive trap of either/or thinking and zero-sum games.<br>
<br>The reality is that the reason all Gulf countries can still export oil (Iran included) is that the Gulf states and Iran have reached a consensus: oil tankers exporting from these countries must load a portion of Iranian oil via ship-to-ship transfers, and these shipments are still transported under the protection of the U.S. military.<br>
<br>Does the U.S. military not know about this? Of course they do.<br>
<br>Why doesn’t the U.S. military intervene? Because if they actually cracked down, not a single drop of oil would make it out of the Strait of Hormuz. The first to face a liquidity crisis and collapse would be the Gulf monarchies. At that point, to save themselves, these Gulf monarchies would collectively dump U.S. Treasury bonds. Is that really what the U.S. wants to see?<br>------

Why would NATO countries squander reserves when war with Russia is a threat? Why would the EU allow themselves to become even more dependent on US refinery capacity? Trump and Bessent just want to push prices down long enough to make this less of a factor in Republican election races.