Global diesel markets are heading into winter with increasingly limited supply buffers as refinery disruptions in Russia and the Middle East leave other producers struggling to make up the shortfall.
Refining and commodity trading executives told Reuters that the diesel market could remain tight into next year, with millions of barrels of daily supply unavailable and little immediate prospect of a full recovery.
The supply gap is being compounded by declining inventories. Russell Hardy, chief executive of Vitol, said the market was losing roughly 2 million barrels per day from Russia and nearly another 2 million bpd from the Middle East.
“When you're looking forward to a winter season coming where diesel stocks are quite in deficit, you're setting up for an environment where that strength could continue in those markets,” said Mark Senn, senior vice president for global trading at Phillips 66.
The strain is already being reflected in prices paid by consumers. US diesel prices surpassed $5.90 per gallon this month, reaching record levels, while higher fuel costs are spreading across international markets and prompting some governments to consider emergency measures, including fuel-tax reductions.
Hardy said Middle Eastern fuel exports are currently running at only about 1 million barrels per day, forcing the market to draw down inventories to compensate for the reduced availability.
“We keep eating into the surplus that exists around the world, and we're pretty much at the bottom of our stockpiles,” the Vitol chief executive said.
The immediate supply outlook remains particularly difficult because several disrupted refining centres face restrictions or physical damage that cannot be resolved quickly.
Russia has imposed a ban on diesel exports while it works to repair refineries damaged by Ukrainian drone attacks and deals with shortages in its domestic fuel market. The export restrictions have removed a major source of diesel from international trade just as demand typically strengthens ahead of winter.
Middle Eastern refiners face a different set of obstacles. In addition to damage to some facilities, producers are struggling to move refined products through the Strait of Hormuz amid continuing attacks and disruption around the strategic waterway.
The latest blow came in Saudi Arabia, where Yemen's Houthi rebels again attacked Saudi Aramco's Jizan refinery, according to the report. The facility has a processing capacity of 400,000 barrels per day.
The combination of lost Russian exports, constrained Middle Eastern shipments, damaged refining infrastructure, and shrinking inventories is leaving other regions with limited capacity to replace the missing volumes.
With winter approaching and stockpiles already under pressure, industry executives expect diesel market tightness to persist unless disrupted refining capacity and export routes return faster than currently anticipated.