IEA: The world is fighting for every drop of diesel. The deficit will persist into 2027

The International Energy Agency (IEA) said in a report on Wednesday that the global diesel shortage is likely to persist well into next year. The main cause is armed conflicts that are significantly curbing production in the Middle East and Russia, while record-high prices are prompting stock drawdowns even before the winter demand peak. The agency expects the global oil market to move into surplus during next year. However, structural problems related to transportation and refining will continue to have a negative impact on fuel availability.

Refining recovery will not make up the shortfall

Global refining capacity was significantly hit in September by attacks on facilities in Russia and the Middle East, widening the gap between diesel and crude oil prices to a record 95 dollars per barrel. North American refineries are benefiting most from this. By contrast, margins at European and Asian refineries have fallen sharply due to rising oil prices and, above all, the cost of transporting it.

"Record diesel prices are already having far-reaching economic consequences, raising the cost of goods and affecting real incomes, economic activity and inflation," the agency said in its monthly oil market report.

The IEA expects refining output to increase toward the end of this year, leading to fuel stock replenishment. This will not be enough, however, to make up for the shortfall that has built up in the middle distillates segment over the course of this year. A significant volume of diesel and jet fuel will therefore remain in short supply on the market early next year as well.

IEA member states are currently coordinating the release of 100 million barrels of oil and diesel from emergency stocks in an effort to calm prices. They are facing growing political and economic pressure, as the situation is having a very negative impact not only on transportation but also on industry and agriculture.

Diesel export losses from the Middle East and Russia reached 1.3 million barrels per day in September, the IEA said. The diesel market remains under considerable pressure, according to the agency, as prolonged supply disruptions have led to out-of-season stock drawdowns. This is particularly risky ahead of autumn refinery maintenance and the winter demand peak.

Total global oil demand is expected to fall by 2.6 million barrels per day in 2026, with diesel accounting for a quarter of the decline. The IEA also expects global oil supply to fall by 5.8 million barrels per day year on year this year. The trend is expected to reverse next year, with supply forecast to rise by as much as 7.7 million barrels per day, bringing the global oil market back into surplus. The fuel market, however, is likely to remain tight.

Release of strategic reserves has slowed

The pace of releases under the original coordinated release of 400 million barrels launched by the IEA in March has slowed significantly. While 2.2 million barrels of oil and fuels per day were released this way from March to June, the rate was only 270 thousand barrels per day in September. According to IEA data, 331 million barrels have so far been released from emergency stocks under the measure. European countries are due to release a further 46 million barrels onto the market under the agreement.

IEA member states currently hold one billion barrels in reserves, roughly one-fifth of which is diesel. Continued stock drawdowns will therefore undermine the IEA's ability to respond to potential further price shocks or external events.

"With the system's remaining reserves continuing to shrink and conflicts in the Middle East unresolved, oil markets may face further turbulence in the coming months before a potential surplus emerges in 2027," the agency said in the cited report.