Diesel Crunch Set to Worsen as Refining Capacity Falls Short, Industry Warns
The tight global diesel market is set to further tighten in the coming months and keep fuel prices high, raising the prices of all goods and threatening the inflation targets of the central banks. Industry officials, who gathered at the APPEC petroleum conference in Singapore this week, warned that the market has not seen the worst of the diesel crisis yet. Analysts say the real stress in oil…
The global diesel market is on the brink of a significant tightening, with industry officials sounding the alarm that the worst may be yet to come. This crisis is poised to push fuel prices higher, impacting the cost of goods and potentially jeopardizing central banks' inflation targets. Despite recent increases in crude oil flows from the Persian Gulf, the refining capacity is insufficient to meet demand, with only a fraction of outbound flows being converted into refined products.
Russell Hardy, CEO of Vitol Group, emphasized that the market is still not running enough refining capacity, leading to the depletion of global surpluses. The refineries in the Middle East face challenges due to Iranian strikes, while Russia's refinery capacity is severely restricted by Ukrainian drone strikes. In the United States and other regions, refineries are operating at maximum capacity but are unlikely to maintain this level for long.
If the refining system can sustain its current processing rates until the end of this year, it would be considered a remarkable achievement, according to Shaikh Khaled Ahmad Al Sabah, managing director of Kuwait Petroleum Corporation. However, he warned of an impending difficult winter in Northwest Europe, indicating that the diesel crunch is only beginning.
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