The global market currently lacks sufficient diesel reserves for the upcoming winter season, a situation exacerbated by a sudden supply contraction in Q3 and a significant depletion of previous inventories. Last month, global diesel exports fell by 700,000 barrels per day year-on-year. The IEA noted that increased supply from other regions only partially offset the shortfalls from Russia and the Middle East.
Even with an anticipated rapid recovery in refinery operations by year-end, diesel supply is still projected to fall short of Q4 demand. The report concluded that restoring depleted inventories is improbable before the second half of 2027.
Wholesale diesel prices surged, with a barrel exceeding 200 USD in Singapore by mid-September and hitting a record 220 USD in Europe and the US. Consequently, retail diesel prices also climbed to unprecedented levels across most major economies.
The agency warned that ongoing tensions in the shipping market could further inflate diesel prices for key importing regions such as Europe, Africa, and Latin America in the coming weeks.
Last week, US President Donald Trump announced an agreement with Russian President Vladimir Putin to supply over 4 million tons of diesel globally, intended to mitigate price hikes from supply disruptions. However, the deal met bipartisan opposition in both the US and Europe. The US Energy Information Administration (EIA) further indicated that this volume of diesel would only cover 10 days of US consumption or one day of global demand.
For the current year, the IEA's overall assessment of the global oil market projects an average reduction in oil demand of 2.6 million barrels per day, with diesel accounting for 25% of this decline.
Conversely, oil supply is anticipated to decrease by approximately 5.8 million barrels per day before rebounding with an increase of 7.7 million barrels per day in 2027. The IEA cautioned, however, that recurrent attacks in the Gulf region, particularly targeting Saudi Arabia – the area's top oil producer – leave this recovery fragile.
Ha Thu (via CNBC)
