Tight diesel supplies could persist well into next year, the International Energy Agency said on Wednesday. Conflicts curb output from the Middle East and Russia, and record prices push stock drawdowns ahead of peak winter demand. Emergency reserve releases have slowed.
Diesel shortages could persist well into 2027, the IEA said on Wednesday, as conflicts curb output from the Middle East and Russia. Record high prices are spurring stock drawdowns ahead of peak winter demand.
Record margins hit the wider economy
Diesel refining margins, the fuel's premium to underlying crude oil, soared to record highs of almost $95 per barrel in September. Attacks on energy infrastructure linked to the Iran and Ukraine wars reduced refining capacity and hit production.
Wholesale diesel reached $220 a barrel in Europe and the US last month, more than twice its prewar level, according to the Financial Times. The IEA said record diesel prices are already raising the cost of goods and affecting real incomes, economic activity, and inflation.
Oil prices were little changed on Wednesday. Brent futures traded at around $105.80 per barrel at 0932 GMT, up 0.1% from the previous close.
Reserve releases slow as buffers shrink
IEA members are coordinating the release of 100 million barrels of oil and diesel from emergency reserves to calm prices. Combined losses of diesel exports from the Middle East and Russia totalled 1.3 million barrels per day in September.
Meanwhile, the pace of releases from the IEA's initial 400 million-barrel coordinated release slowed to around 270,000 bpd in September, down from an average of 2.2 million bpd over March-June. By the end of September, 331 million barrels had been released under that agreement.
Refinery recovery may not close the gap
The IEA expects a recovery in global refinery operations towards the end of this year, but that will be insufficient to offset the deficit accumulated in middle distillates markets this year. Separately, the agency said a US-Russia deal to ease sanctions and restore Russian diesel exports "is unlikely to materially alter" the amount of fuel in the market, because Russia is struggling with a lack of operational refineries, the Financial Times reported.
Diesel prices in Europe, Africa and Latin America could start rising again in the coming weeks, the IEA warned. The agency also predicts global oil supply will fall by 5.8 million bpd this year, then rise by 7.7 million bpd in 2027 to tip the market back into surplus.
In the absence of a resolution to the conflicts in the Middle East, the IEA said, oil markets may experience more turmoil in the months ahead before any eventual surplus emerges in 2027.
Sources: Reuters via Investing.com, Financial Times
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