December Brent climbed to about $102.70 as Chinese refiners suspended product shipments and Washington pressed Europe to tap its diesel reserves. Heating oil futures, the U.S. diesel benchmark, slipped about 0.6%.
Oil spent the early hours of Thursday falling. By the afternoon it was up close to 5%.
December Brent slipped more than 1% in early trading, then reversed. By about 2 p.m. Eastern it stood near $102.70 a barrel, up 4.8%. West Texas Intermediate gained 3.2% to about $93.30.
The turn followed word that Chinese refiners had suspended exports of oil products to destinations beyond Hong Kong and Macau "until further notice," according to four people briefed on the decision. PetroChina canceled several October cargoes of gasoline and jet fuel, three of them said. Beijing has tied any resumption to fuel stocks returning to prewar levels, according to people in the trade. China's National Development and Reform Commission, PetroChina and Zhejiang Petrochemical did not comment.
Later in the day, U.S. officials said a third aircraft-carrier strike group would reach the Middle East by the end of November, alongside up to 10,000 additional troops. Brent extended its gains afterward.
What China was shipping
Chinese refiners loaded about 1.4 million metric tons of diesel, 0.5 million tons of gasoline and at least 2 million tons of jet fuel for export in September. An analyst at the data firm Kpler estimated that domestic gasoil and diesel stocks are about 20 million barrels below the level Beijing wants, and gasoline about 9 million barrels short.
"We've lost diesel exports from China," Energy Secretary Chris Wright said.
Europe's reserves
A possible release of diesel stocks was the subject of a call on Thursday among officials from Britain, Ireland, Italy, France, Germany and the European Commission, an EU official said. Washington wants the bloc to put 120 million barrels of diesel on the market over a six-month period, according to a person in a European capital. An official at the Élysée said President Emmanuel Macron will convene a video conference of Group of Seven leaders on fuel prices, including reserve releases coordinated by the International Energy Agency. Interior Secretary Doug Burgum said a voluntary European release "would help." Germany's economy ministry did not respond to requests for comment, and France's energy ministry declined to comment.
Crude up, diesel down
The odd number on the board was diesel. Heating oil futures fell about 0.6% on a day crude rose nearly 5%. China's halt removes diesel from the global market. A coordinated European release would add it back, and the two moves together suggest traders may be weighing the second against the first.
Physical crude shows how tight prompt supply remains. Dated Brent, the benchmark for cargoes loading soon, settled near $121 on Wednesday. "Physical markets are currently tight despite the pick-up in Hormuz flows," said Kim Fustier, senior oil and gas analyst at HSBC.
Two readings
One reading is that export curbs are spreading. Russia's diesel ban runs through October, China has now stopped product shipments, and a U.S. restriction remains under discussion. On that view, refining margins and headline inflation stay elevated through winter.
A second reading is that China's halt is administrative and tied to a quota decision due after Oct. 7, and that a coordinated reserve release adds supply in the meantime. Falling U.S. diesel futures fit that view.
Dates ahead
OPEC and its allies meet Sunday. Bids for the Strategic Petroleum Reserve exchange are due Tuesday. Beijing's next export-quota decision comes after Oct. 7 and the G7 leaders' call is still to come. A European release decision, or a reversal by China, would show up first in the gap between crude and diesel futures.