On this Friday morning, we're looking at WTI as well as Brent prices lower. And France has proposed that developed nations release strategic reserves to ease surging prices at the pump. Now we saw Brent crude fall below the $100 barrel level, while European diesel dropped nearly 6%. This morning, Paris did call on IEA member nations to release 100 million barrels of diesel and crude.
Now, this proposal does come as fuel markets do face severe strain with diesel supplies deeply roiled by the war in the Middle East, as well as Ukrainian attacks on Russian refineries. Meanwhile, the U.S. is deploying a third carrier strike group to the Middle East as a naval blockade suffers Iranian exports.
And in Q3, we saw WTI surged 31%, while Brent did climb 42% and ultra low sulfur diesel futures surge over 53%. Now, Washington is threatening U.S. diesel export curbs while pressuring European allies to immediately open emergency stockpiles. And this morning, a new headache could be emerging for U.S. refineries.
Canada is working on a new pipeline that will draw oil away from American plants that rely on it. While joining us on this Friday morning to weigh in is Patrick de Haan, who is head of petroleum analysis for GasBuddy. Patrick, thank you so much for joining us. Well, according to GasBuddy, the national average for a gallon of gas began Q3 below $3.80, which does feel as though it was a long time ago.
And it did finish the quarter around $4.42. And at the same time, we are monitoring a lot of factors here. So what can consumers expect as we head into the final quarter of this year?
Probably a lot of the roller coaster ride that we've been on for the last seven months. As you mentioned, these ongoing geopolitical tensions really don't show much sign of improving, although there have been some murmurs about a deal in the US and Iran kind of trading some of those ideas after a tax, but it's hard to predict what might be next, whether we'll see some sort of deal materialized after the midterms.
That is something that Trump has suggested that Iran is holding out right now, given the political pressure and whether or not Ukraine continues to attack Russian oil refineries is up in the air as well. So it's hard to predict if the next chapter is going to be down or up right now. The national average moving lower.
States like Georgia and Ohio, a lot more states also trying to utilize levers to improve the price of gasoline and diesel. A lot of states issuing waivers allowing for the use of dyed diesel or tax free diesel on roads. A lot of that political pressure coming ahead of the midterms.
Yeah. And speaking of which, Patrick, all of us are counting down to the November midterms that are coming up. And of course, when it comes to energy prices, it's not just supply, but it's also geopolitics as well as politics. And when we take a look at the US refinery capacity utilization, it did cool in September.
So why do we see that easing from an over 96% rate in July? And also, given your perspective, what do you think are some of the risks with utilization running above the historical average?
Well, you know, we are getting into the time of year when refineries have done planned turnarounds. That is typical. Maintenance happens after a very busy summer, and we're starting to see that across the country. And that would be typical for this time of year to see utilization rates fall. And now they're still elevated above 90%.
Typically during turnaround season, it's not uncommon for the utilization rate to fall below 90%. Of course that is part of the risk though to the market is that refineries any slowdown right now at refineries doing turnarounds certainly could be problematic for product prices. Now, we're not seeing that yet this morning.
But with the global market that's in bad need of supply. Any slowdown at refineries certainly can add up over time. Now, hopefully refinery utilization, which could go lower in the weeks ahead. It should start to bounce back up by Thanksgiving and we should start to see a little bit of recovery. But a lot of the story we're finding with gasoline and diesel prices has less to do with the price of oil, but more so to do with global refining capacity issues and any sort of improvement through the Strait of Hormuz.
Keep in mind, it's not just oil that's being blocked through the strait. It's also refined products will be carefully watching how that develops here in the run up to the election, will more products start getting through the strait? That's the biggest question.
Yeah, absolutely. And I'm glad you brought that up about refined products because that is key. But I do want to shift our focus over to our neighbor up north. Now Canada is working on a pipeline to diversify its economy. So this could divert Canada's oil away from U.S. refineries. So what are you seeing when it comes to Canada?
And while I have you here, since we have been hearing from European Union member states, what do you make of what's happening over in France.
Well, you know, obviously a lot of pressure. A lot of political pressure over in France and really the rest of the EU who've been trying to look at how to solve their record setting diesel prices as well. So it doesn't surprise me. They do sit on some sizable reserves of not only oil, but also refined products.
They've also been dealing with refining issues themselves. Pushing refineries. Seeing the shutdown of refineries in recent years has put them in a tough spot to be in, so it's not surprising that France is making this call for EU countries to release refined product. Unlike the US, some member nations of the EU do hold refined products reserves.
You know, when it comes back closer to home here in Canada, um, you know, the US and trade relations have soured between the US and Canada. Canada is obviously looking at ways to diversify its ability to send oil beyond just the United States. It's long been selling its oil at a discount to US refineries in the Rockies, the Plains and the Great Lakes.
So to see itself increase in capacity to potentially export more oil is not exactly surprising. But that certainly could be a bit of an alarm for refineries in the nation's interior who have relied on that oil, but have also been getting large discounts because of Canada's inability to export their oil.
And while I have you here, we are counting down to the final months of 2026, and Q4 tends to see a strong uptake in heating fuels as well as diesel and industrial activity, so it does typically make it the highest overall demand quarter of the year, not just in the US, but obviously around the world. So do you see the risk of a US energy crisis as demand rises this quarter?
I certainly don't know that we'll see much of a crisis now. It does still hinge on whether or not the US is going to move forward. President Trump continues to mull over the possibility of a diesel export ban, diesel and heating oil essentially being the same product, that could be problematic. Not necessarily for the US, but abroad.
Those European countries may be using that in their rationale to release oil from their reserves. And I would say that that is really what is going to be contingent on whether or not there is any sort of crisis that develops. Of course, by banning diesel exports, you also giving refineries in the United States a bit of incentive to start throttling back on output to avoid flooding the market and to avoid inventory surpluses.
So that may be sending the wrong signal if we can escape a diesel export ban, I think that will encourage refineries to continue running at high utilization, and that would probably stave off any issue for the US. But abroad, it certainly could be a more challenging winter for the EU, given their lack of diesel supplies on hand and their lack of ability to refine oil.
And Patrick, finally, before I let you go, crude oil shipments through the Strait of Hormuz hit pre war levels on a seven day average running through last Monday and at the same time. Saudi Arabia's east west pipeline is back up and running. So do you think there could be some relief to U.S. consumers as we head into the final months of the year?
Yeah, it's looking that way, especially with WTI below the $90 barrel mark this morning with Brent falling below $100. It's turning from an oil story in the Strait of Hormuz. More to getting it refined and refined product flows. And that's the difficulty here. So I do think there could be a bit more recovery with gasoline and diesel prices maybe edging a bit lower in the months ahead as oil becomes cheaper.
But it's still very much contingent on US refinery maintenance season and turnarounds there. Whether they can take that cheaper oil and how much they'll be refining, whether or not we can get out of this turnaround season at refineries quicker certainly would bode well for any potential price relief for motorists.
So it's really going to be contingent on how quickly refineries can wrap up their turnarounds. But I do think that, you know, if things hold the way they are today, we should see moderate relief in the weeks ahead.
And finally, Patrick, before I let you go, regarding the crisis between Ukraine as well as Russia, where do you see this going? As we head into the final months of this year and tell us how this actually affects refined products.
Well, that's the million dollar question. I couldn't tell you on which way we're going to see Russia and Ukraine in the months ahead. Whatever unfolds there, though, is going to be very critical to whether or not we see Russia exporting diesel to the global market. That certainly could rescue and bail out global diesel prices that have been at record levels.
Well, appreciate your time, Patrick. Thank you so much for joining us on this Friday morning. And thank you so much for sharing your perspective.
Thanks for having.
