The International Energy Agency, in its recent report on the oil market, has detailed the state of diesel and its forecasts for 2027. According to this report, the diesel shortage will seriously continue due to a sharp decline in storage levels and production ahead of peak winter demand.
Factors Affecting Production Decline
The reduction in refining capacity and consequently the severe drop in diesel production due to political tensions, especially the U.S. and Israeli regime's war against Iran, are considered the main factors behind this shortage. In September, the refining margin for diesel reached an unprecedented level of about $95 per barrel. This increase in margin indicates high market pressure and growing demand for this petroleum product.
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Market Situation and Predictions
The International Energy Agency has also announced that there is significant pressure on diesel markets. This pressure arises from long-term supply disruptions and withdrawals from storage, which have become mandatory contrary to the usual seasonal patterns and before the start of maintenance operations at refineries in the fall. Although it is expected that global refinery activity will improve by the end of this year and the process of restoring storage will begin, this alone will not be enough to compensate for the accumulated deficit this year.
Member countries of the International Energy Agency will coordinate the withdrawal of 100 million barrels of oil and diesel from strategic reserves to counter rising prices. This action, along with increasing political and economic pressures regarding the use of this important fuel in industry, agriculture, and transportation, is aimed at maintaining balance in the diesel market.
In September, the total reduction in diesel exports from the Middle East and Russia reached 1.3 million barrels per day. Global oil demand is expected to decrease by 2.6 million barrels per day in 2026, with 25 percent of that related to diesel.
This international body has also pointed out the economic consequences of unprecedented diesel prices and examined their impacts on real incomes, economic activities, and inflation. Currently, the agency predicts that global oil supply will decrease by 5.8 million barrels per day this year, but it is expected to grow by 7.7 million barrels per day in 2027, once again returning the surplus supply to the global oil market.
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