Diesel shortages are aniticpated to continue into 2027, as inventories for diesel shrink during a time of the year when they tend to rise, according to the International Diesel Agency which communicated this in its oil market report, which is released every month.
Diesel refining margins, i.e the price difference between a barrel of finished, usable diesel fuel and a barrel of raw crude oil, climbed to a record high of close to $95 per barrel in September owing to declining refining capacity from attacks connected to the ongoing US-Iran war.
"Diesel markets remained under significant strain as prolonged supply disruptions forced counter-seasonal stock draws ahead of autumn refinery maintenance and peak winter demand," the IEA stated, as per a Reuters report.
The IEA expects a recovery in global refinery operations towards the end of this year, which would start to replenish stocks, but this will be insufficient to offset the deficit accumulated this year, it added.
Members of the IEA are organising a release of 100 milion barrels of oil and diesel from strategic reserves in order to reduce volatility of prices, in the backdrop of increasing economic and poltical pressure due to oil being used in industries, agriculture and motor-powered technology such as vehicles.
The agency stated that the Middle East and Russia saw combined diesel export losses of 1.3 million barrels per day in Sepetmber. The overall global oil demand is forecasedt to decrease by 2.6 million bpd in 2026 with diesel making 25% of this decline as per the IEA.
"Record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation," the diesel body stated.
This development comes after US President Donald Trump said on Truth Social, after a call with Russian President Vladimir Putin, that Moscow would supply over 300,000 tonnes of diesel immediately, 500,000 tonnes in November and one million tonnes thereafter.
A further 3 million tonnes followed within a short period, subject to the condition of Russian refineries, taking the total to 4.8 million tonnes.
The Kremlin said Russia was ready to supply oil and products to world markets. Deputy Prime Minister Alexander Novak said monthly volumes could eventually reach 3 million tonnes.
A temporary US Treasury licence will allow Russian diesel to reach global buyers until April 2027.
ALSO READ: Trump's Russia Deal: What 4.8 Million Tonnes Of Diesel Flow Means For Global Markets?
Diesel has been the hardest-hit fuel since US-Israeli strikes on Iran prompted Tehran to block Hormuz in late February. Prices in the US average about $6.27 a gallon, against $3.67 a year ago, according to the American Automobile Association.
With the midterm elections less than a month away and early voting under way, farm states that depend on diesel have become political battlegrounds for the Republicans.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.