Oil eased as Europe agrees to tap diesel reserves, widening Brent–WTI spread past $11

Global crude oil futures settled lower on Friday as European leaders agreed to release emergency fuel reserves to cool spiralling product prices, though persistent Middle East war risks and strikes on Russian refineries limited losses for Brent.

Crude retreated after the EU approved releasing 50 million barrels of emergency diesel alongside a proposed 50-million-barrel IEA crude drawdown. The intervention followed pressure from US President Donald Trump, defusing immediate threats of a US fuel export embargo. While the volume could briefly balance global supply alongside recovering Persian Gulf flows (23.3 million bpd), it targets acute middle-distillate shortages rather than structural crude availability.

The policy shift hit WTI hardest, knocking it down $1.76 (-1.6% weekly) as domestic export discounts vanished, blowing the transatlantic Brent–WTI spread past $11 a barrel. Brent proved far more resilient, shedding just 6 cents (+0.11% weekly) amid strong prompt backwardation, Ukrainian drone strikes on Russian refineries, and US military buildups in the Middle East. Underscoring this physical tightness, Barclays lifted its fourth-quarter Brent forecast by $20 to $115 a barrel.

Upstream pricing remains hostage to refining bottlenecks. With China halting October fuel exports and Russian processing curtailed, emergency reserves offer only fleeting relief. Distillate-maximised refinery runs continue to starve light-end yields, locking in an unyielding naphtha cost floor for Asian steam crackers. With downstream polymer buyers firmly resisting price hikes, regional petrochemical producers face severe margin compression heading into Sunday’s OPEC+ review.