The diesel crisis will significantly continue due to ongoing conflicts in the Middle East and damage to Russian refineries. Analysts believe that temporary supply efforts such as the Trump-Putin diesel agreement will not have a significant impact on the global diesel market.
Current Diesel Supply Situation
As long as Middle Eastern refineries, which have been damaged due to Iranian attacks, do not return to full operations and Russian diesel exports do not improve, global diesel supply will remain below 2025 levels. Currently, other parts of the world, including the United States, are producing at full capacity, but they are unable to fully compensate for the supply shortfall.
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Refineries outside the Middle East and Russia have postponed planned maintenance to produce more diesel in recent months. However, they cannot continue this delay indefinitely due to the risk of breakdowns and unexpected shutdowns, which would worsen the supply situation.
Export Issues and Impact of Conflicts
Crude oil flow from the Strait of Hormuz has returned to levels close to pre-war, but fuel exports remain limited, and shipping them from the Gulf has become more complicated due to risks from attacks on ships. Fuels are typically shipped on smaller tankers. Refineries like BAPCO in Bahrain and Jizan in Saudi Arabia were damaged in the early weeks of the war due to Iranian attacks. BAPCO has now returned to 75% of its full capacity, while the Jizan refinery, with a capacity of 400,000 barrels per day, remains closed after several attacks in recent months.
Additionally, Russian diesel exports are facing a domestic fuel crisis due to half of the country's refineries being shut down because of Ukrainian drone attacks, leading to a ban on diesel exports. This ban was partially lifted earlier this month when U.S. President Donald Trump announced that an agreement had been signed with Putin to supply diesel to the United States.
The first tanker, carrying about 40,000 metric tons of ultra-low sulfur diesel (ULSD) from the Baltic port of Russia to the United States, has departed last week. This shipment, according to Robin Mills, CEO of the energy consulting firm Qamar Energy, is less than one-tenth of what the United States consumes daily.
Future Outlook
Analysts believe that the Russian diesel agreement will have a negligible impact on global diesel supply and prices. There is no immediate solution on the supply side that can alleviate pressure on diesel prices, especially with the winter season approaching and increased heating oil demand in the Northern Hemisphere. With rising gasoline and diesel prices, Europe is rapidly moving towards electric vehicles. However, all these measures are by no means immediate solutions to the global diesel crisis.
As long as fuel flow from the Middle East and Russia does not return to adequate levels, there is a risk of price increases in the short term. Global fuel markets will remain tight at least until the middle of next year, as maintenance planning in the second half of 2027 will significantly increase.
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