Oil benchmarks fell two dollars on Friday after European leaders endorsed a proposal — originating with President Trump — to draw on strategic diesel reserves as a way to ease costs at the pump and reduce reliance on fuel supplies from the United States.
At 10:49 a.m. CDT (1649 GMT), Brent crude had shed $1.80 per barrel — a drop of 1.76 per cent — bringing the price to $100.50. Crude oil priced at the West Texas Intermediate benchmark shed $2.02 on the session, a decline of 2.18 per cent that pulled the contract down to $90.85 per barrel. Across the trading week, Brent crude was headed toward a loss of roughly 2.84 per cent, while WTI trailed behind by approximately 1.54 per cent.
Member states of the bloc backed a proposal put forward by France to draw down reserves of diesel fuel, according to a person with knowledge of the talks who spoke to a broadcast news outlet. In a Truth Social post, Trump stated that Europe had agreed to release a large quantity of its diesel oil reserves, a claim that followed his earlier remarks about potentially restricting diesel exports from the United States.
Phil Flynn, a senior analyst at the Price Futures Group, noted that Europe stood among the regions most exposed to any such export restriction, while three sources with knowledge of the discussions told a reputable news outlet that EU governments had acted after weighing a French proposal calling on European nations to release 50 million barrels of diesel and on International Energy Agency members to release an additional 50 million barrels of crude oil. Two of the sources indicated that, under the plan, a portion of diesel volumes would be freed up by Europe across a 20-day window.
A videoconference bringing together G7 leaders was convened by French President Emmanuel Macron on Friday, according to a statement from the Elysée Palace. Whether G7 nations had endorsed France's proposed release volumes remained unconfirmed.
A Saxo Bank commodity strategist argued that the core pressure point in energy markets had shifted away from crude supply — supported by recovering flows out of the Middle East — toward tighter availability of refined products, a condition attributed to diminished refinery output and capacity in both the Middle East and Russia.
Oil prices closed on a firmer footing Thursday after a broadcast outlet reported that refiners in China had halted petroleum product shipments abroad through October, a move aimed at keeping domestic supply intact. Reports also circulated that an additional aircraft carrier, along with as many as 10,000 further troops, were being positioned toward the Middle East by the US, with the administration at that point weighing whether to resume military strikes against Iran following the midterm elections — a development that also lent support to prices.
According to Hamad Hussain, a climate and commodities economist at Capital Economics, an additional drawdown of oil inventories could be enough to nudge the broader market into a modest surplus, provided that the recent uptick in Middle Eastern supply flows holds. A Barclays research note pointed out that even with crude shipments from the Middle East running at a higher rate, the underlying physical market held up firmly — stock levels continued to fall and near-term cargo prices carried a notable premium against later delivery contracts. The fourth-quarter Brent price target was moved up by $20 a barrel, landing at $115, while the projection for 2026 was also revised upward to $100 a barrel.
Drone and missile attacks on petroleum infrastructure in the Samara and Volgograd regions were announced by President Volodymyr Zelenskiy through a social media post on Friday, with the operations described as having taken place across the preceding day.
Equity markets advanced on Friday as turbulence across bond and currency trading subsided, with investors turning their attention to upcoming American employment figures that stand to influence the Federal Reserve's next steps on interest rates. Across Europe, longer-dated government bond prices edged upward on the day, though debt from higher-borrowing nations — France and Italy among them — trailed the advances posted by German equivalents, a gap that pointed to portfolio managers seeking cover from mounting fiscal pressures.
Yields on Germany's 10-year bond — the reference rate for the euro zone — retreated by 6.5 basis points over the course of Friday's session. France's 10-year borrowing rate eased four basis points to 4.89 per cent, stretching the yield gap between French and German sovereign debt to 149 basis points — a spread not seen since the euro zone's debt difficulties of 2012.
George Lagarias, chief economist at Forvis Mazars, noted that conditions had not yet reached the threshold of a full-blown crisis but carried the potential to do so if they persisted for another few weeks, a period he suggested would shift the conversation firmly toward bond market distress. That broader pressure has built over recent weeks as elevated energy costs have complicated the path for inflation and added further strain to public finances already operating under considerable pressure.
Yield levels on Japanese government bonds reached multi-decade highs last week, while the rate attached to the US 10-year Treasury note pushed past a threshold last recorded 24 years ago — and that shift played out before Friday's jobs report arrived. Analysts pencilled in a September nonfarm payrolls increase of around 90,000, with the jobless rate broadly anticipated to hold at 4.1 per cent.
Odds of the Federal Reserve lifting rates a second time this month — sitting at roughly 25 per cent in market pricing — could shift upward on a robust reading, given that two senior policymakers indicated this week they were seeking additional economic data before committing to any further move on borrowing costs. Markets have already priced in a rate cut for December.
Chris Weston, head of research at Pepperstone, noted that a stronger-than-expected wages reading could carry outsized weight for US rates, Treasuries, and the dollar given the Federal Reserve's current narrow focus on inflation and price pressures, adding that risk assets and long-end nominal Treasury yields had so far absorbed the rise in US real yields without notable strain. One analyst noted separately that a prolonged rise in term premium posed a potentially greater concern for markets.
The pan-European STOXX 600 index edged up 0.8 per cent in early trading on Friday, though the benchmark remained on course for a weekly loss of around 1 per cent. Futures tied to the Nasdaq added 0.7 per cent while those tracking the S&P 500 posted a 0.4 per cent advance.
Across Asia-Pacific markets outside Japan, the MSCI regional benchmark held broadly steady while remaining on course to close the week roughly 1.2 per cent lower. Tokyo's benchmark index slipped 0.9 per cent on the day, yet still wrapped up the week with a gain of nearly 3 per cent. Trading on China's mainland exchanges was paused for a public holiday running through the following Wednesday. Trading on Hong Kong's Hang Seng index resumed after a public holiday, with the benchmark dropping 2.7 per cent by the close.