Global Diesel Supply Crunch Is Set to Last Through Winter

The global diesel fuel supply is expected to remain tight throughout the coming winter season due to insufficient refining capacity to compensate for the losses from Middle Eastern and Russian facilities, according to industry executives. Russell Hardy, CEO of Vitol, stated at the Asia-Pacific Petroleum Conference that there is a significant shortage of products as Russia is missing 2 million barrels of diesel per day and the Middle East is missing nearly the same amount.

When winter arrives, diesel stocks are already in deficit, potentially leading to continued high prices in those markets.

Phillips 66's senior vice president for global trading, Mark Senn, echoed the concern, noting that diesel prices in the United States have reached record levels, surpassing $5.90 per gallon this month. Across the world, fuel prices are skyrocketing as the supply crunch reaches end consumers, prompting governments to implement emergency relief measures like fuel tax cuts.

The shortage is not expected to be resolved anytime soon. As Hardy explained, fuel exports from the Middle East are running at only 1 million barrels per day, leading to inventory depletion with no immediate replenishment in sight. Russia's ban on diesel exports, coupled with damage to refineries from Ukrainian drone strikes and domestic fuel shortages, exacerbates the situation.

Similarly, Middle Eastern refiners are unable to export their fuels due to the Strait of Hormuz restrictions and refinery damage, including the recent attack on Saudi Aramco's Jizan refinery by the Yemeni Houthis, which has a daily capacity of 400,000 barrels.