Diesel markets could remain tight until mid-2027, with the IEA warning that depleted inventories and refinery bottlenecks will delay recovery.
oilprice.com
The recent rise in crude oil flows out of the Strait of Hormuz isn’t solving the world’s most pressing fuel problem—the diesel crunch and record diesel prices that start to feed into the wider economy.
While Middle East crude oil flows are nearing pre-war levels, global diesel supply is much lower due to refinery constraints in the Middle East and Russia that the rest of the world cannot offset.
The diesel squeeze hiked wholesale and retail prices to record highs in the middle of September as the market realized that crude oil supply does not equal refined product supply, and demand for middle distillates started rising seasonally from agriculture, road freight, and the coming winter.
There isn’t an easy fix to the crunch, neither the G7’s promised release of 100 million barrels of oil, including diesel, nor the controversial Trump-Putin deal for the U.S. to buy Russian diesel.
The global diesel squeeze will end when markets return to some kind of normality, which is months away, at best, and certainly not before the U.S. midterm elections on November 3.
The current crunch in the diesel and gasoil markets is set to extend into the middle of next year, the International Energy Agency (IEA) said in its monthly
Oil Market Report published this week.
Counter-seasonally, gasoil and diesel markets tightened in the third quarter of 2026, amid prolonged disruptions in refinery operations in the Middle East and Russia, the agency noted.
“Combined with much heavier-than-normal inventory declines in 2Q26, this has deprived global gasoil markets of crucial stock cover ahead of the peak winter demand season,” the IEA said.
But the relatively price-inelastic diesel demand has remained strong, supported by government measures aimed at easing the impact of high prices on consumers, according to the agency.
“Falling inventories, soaring cracks, and steepening levels of backwardation have signalled the need for additional supplies,” the IEA said.
Even if refinery throughput recovers rapidly into the end of this year, gasoil supply will fall short of meeting demand this quarter, “suggesting that the replenishment of lost inventories, outside of typical seasonal fluctuations, is unlikely before 2H27.”
Global diesel exports fell by 700,000 barrels per day (bpd) in September from a year earlier, as a 1.3-million-bpd loss from Russia and the Middle East was only partly offset by higher supply from other sources, the IEA has estimated.
“As the Iran war manifests itself through restricted product availability, soaring fuel prices and a deteriorating economic outlook, diesel will register 25%” of the expected 2.6 million bpd decline in global oil demand this year, the agency noted.
Global diesel prices have eased from the all-time highs of more than $200 a barrel reached in September, but diesel benchmarks remain nearly double the price of crude oil and their pre-crisis levels, the IEA said.
Link for the Report:
Oil Market Report - October 2026 - IEA
