Macron plans to convene the G7 to stabilize oil prices, and expectations of a strategic reserve release push crude oil lower! But the refined product supply crisis is hard to resolve.

French President Emmanuel Macron spoke with U.S. and Canadian leaders on October 2 local time and plans to convene a G7 leaders' meeting as soon as possible to help curb the continued rise in fuel prices, focusing on easing global refined product supply tightness. According to a statement from the French presidential palace, France, which holds the G7 rotating presidency this year, is actively working with the International Energy Agency (IEA) to coordinate measures aimed at easing price pressure and safeguarding crude oil and refined product supplies. Macron stressed that it is in the "common interest" for G7 countries to "act together without imposing energy export restrictions." Overall coordination at the European level is also advancing. European countries have been holding emergency consultations on how to respond to Washington's pressure to release strategic fuel reserves and avoid a possible U.S. energy export ban. Faced with global market turmoil triggered by the geopolitical war, Europe has been significantly slower than the United States in tapping emergency oil reserves, so the region still has a considerable scale of reserves available for release. G7 rushes to open the "energy cooling valve"! Oil prices retreat, but pressure to secure refined fuel supply remains Macron's push for G7 coordination is centered on simultaneously easing fuel price increases and global refined product supply tightness, while avoiding export restrictions that could further fragment the market. France is working with the IEA to coordinate crude oil and refined product supply measures; the latest developments show that European countries have discussed a French proposal: Europe would release 50 million barrels of diesel, and IEA members would release 50 million barrels of crude oil. The plan is still under discussion, against the backdrop of U.S. demands for Europe to accelerate the release of diesel inventories and consideration of restricting its own diesel exports. Expectations of reserve releases have already helped cool prices. Around 17:00 Beijing time on October 2, Brent crude oil futures were at $99.48 per barrel, down sharply by 2.77% intraday; WTI was at $89.52 per barrel, down 3.61%; the European diesel benchmark futures fell more than 5% to $1,377 per ton. Based on the settlement price on February 27, the last trading day before the war broke out on February 28, the changes in nearby crude oil futures prices are as follows: Brent crude and WTI crude, the two benchmark prices, are still up sharply by about 38% and 35%, respectively. This comparison uses nearby futures price benchmarks at each point in time, which is enough to show that after the short-term oil price pullback, energy prices are still significantly higher than before the war. Geopolitically, diplomatic contacts continue while the risk of military escalation has not receded. Some media reported on October 1 that Iran is still pushing negotiations through Qatar while preparing a broader response to a possible resumption of large-scale U.S. strikes; The Wall Street Journal latest disclosed that the United States is sending a third carrier strike group and about 9,000-10,000 personnel to the Middle East. Therefore, the current oil price pullback reflects expectations of supply repair and policy intervention, and cannot yet be equated with the disappearance of the war risk premium. From the strait to the bond market: the "fuel supply line" is also a buffer line for global risk assets The Saudi east-west pipeline is recovering, but there is still a clear gap between nominal transport capacity and actual flow. The pipeline restarted on September 22, and Yanbu port subsequently resumed loading; as of media reports on September 29, actual pipeline flow was about 2 million-2.65 million barrels per day, below the nominal capacity of 7 million barrels per day. Kpler at the time expected it could later rise to 3 million-4 million barrels per day, and that restoring the roughly 5.5 million barrels per day seen before the attack could still take a month. The 7 million barrels here refers to transport capacity and cannot be equated with the current incremental market supply. The Strait of Hormuz is resuming passage, while risks in the Bab el-Mandeb Strait continue to constrain alternative routes. Kpler estimated at the end of September that crude oil exports through Hormuz that month were about 9.719 million barrels per day, indicating the strait was not completely closed; but shipping intelligence agencies reported that on September 29, three tankers were still hit by unidentified projectiles while transiting. In the Red Sea direction, the Houthis advanced in September to Perim Island in the Bab el-Mandeb Strait, and on October 2 Yemeni government forces announced 20 airstrikes on Houthi targets in Taiz. From a route perspective, crude oil shipped south from Yanbu to Asia still faces Bab el-Mandeb risk; shipments north through Suez to Europe do not need to pass through Bab el-Mandeb, and the two export routes cannot be conflated. A more critical bottleneck is emerging in refining and refined product trade. The IEA's September report showed that global refinery throughput in August fell by 4.2 million barrels per day year-on-year, and Gulf countries' net diesel exports were only about 390,000 barrels per day, only slightly more than a quarter of pre-war levels. This explains why diesel may still be in short supply even after crude oil exports improve: crude oil arriving at port still needs available refineries to process it, and then delivery through an unimpeded trade network. Releasing diesel inventories can directly supplement end-user fuel; the effect of releasing crude oil inventories depends on whether refining and transportation links can absorb it. If major exporting countries simultaneously restrict refined product sales abroad, domestic supply measures may further raise fuel costs in importing regions, which is precisely the market significance of Macron's emphasis on joint action and avoiding export restrictions. This energy chain is already linked to global bond markets. The U.S. 10-year Treasury yield briefly surged to 5.34% on October 1, the highest since 2002, and returned to about 5.24% on the morning of October 2; the UK 30-year yield previously broke above 6% for the first time since 1998, and later also declined as oil prices fell. The latest moves in long bonds can basically be summarized as a "partial repair after multi-year highs," rather than a continued one-way surge. Easing energy pressure helps improve inflation and policy rate expectations, but fiscal supply, real capital demand and term premiums will still affect long-end pricing. This is also why, in the view of some analysts, the "navigation recovery line" is not yet equal to the "fuel relief line," and the refined product supply line is also an important valuation-system buffer line for global risk assets such as equities, cryptocurrencies and high-yield corporate bonds. Diesel costs pass through transportation, agriculture and industrial production into prices; if energy price pressure persists, it could continue to limit room for monetary policy easing and thereby push up long-term government bond yields, continuously increasing discount pressure on risk assets.