Diesel supplies to remain 'tight' into 2027: IEA

The International Energy Agency (IEA) has warned that diesel supplies will remain tight in the Gulf region until 2027 due to disruptions caused by the US war against Iran. The agency's monthly energy markets report stated that diesel prices have reached record highs across Europe and the US in recent weeks. This is a result of reduced oil exports from the Gulf and damage to refineries in the area following retaliatory attacks by Iran.

In response, governments have implemented measures such as reducing fuel taxes, providing subsidies, and releasing strategic reserves, which will need time to recover. The IEA anticipates that refining capacity will improve and lead to a surplus on the diesel market in the first quarter of 2024, aligning with typical seasonal patterns.

However, this recovery will not fully compensate for the deficit caused by the US and Israel's strikes on Iran since late February, which have caused global energy prices to surge. If Gulf supplies fail to return to normal levels soon, further demand reductions and the associated economic consequences may be necessary to balance the markets, according to the IEA.