Nothing to store: the diesel shortage will last at least until 2027
The global diesel shortage caused by the wars in Iran and Ukraine is unlikely to ease before next year at the earliest – that is what storage market data and industry players indicate, according to a Reuters analysis published on Monday. The two wars have removed several million barrels of supply from the market every day in the Middle East and Russia, inventories have fallen to historic lows, and prices are hitting records. Expensive fuel is slowing economies from the United States to Southeast Asia, since diesel powers agriculture, industry and freight transport.
According to data from the U.S. Energy Information Administration (EIA), U.S. diesel stocks fell to 107.9 million barrels as of September 11. That is the lowest level recorded for this time of year since records began in 1982. Retail diesel prices crossed the $6-a-gallon threshold this month for the first time: the American Automobile Association (AAA) recorded a record price of $6.23 on September 14, equivalent to roughly $1.65 per liter. The price increase is hitting farmers, truckers and manufacturing plants particularly hard, and according to Reuters it is also causing concern within Donald Trump's Republican Party ahead of the November midterm elections.
One of the clearest signs of the persistent shortage can be seen in the storage market. According to data from storage broker The Tank Tiger, North American refiners and traders are not renewing their leases on diesel storage tanks because there is barely any fuel left to store. In North America and the Caribbean – a major trading hub – available diesel storage capacity for lease rose to 13 million barrels in October, up from 11 million in June. That is a four-year high.
“There's more available storage because nobody wants to renew their existing contracts. Why would you pay for a tank if there's nothing to keep in it?”
said Steven Barsamian, the company's chief operating officer. Since tanks are typically leased for six months or a year, Barsamian said that the combination of dwindling stocks and freed-up storage capacity shows that market participants expect tight supply to persist at least until the first quarter of 2027. According to the EIA's September short-term forecast, U.S. distillate inventories – which include diesel – will fall below 100 million barrels this month and are expected to remain below the five-year minimum through the end of 2026 and much of 2027. The agency raised its expected average retail diesel price for 2027 by 33 cents to $4.40 a gallon, citing a persistent global supply shortage.
The situation is no better in Europe. According to data from Insights Global, diesel stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region were 16 percent below the five-year average in July. In Singapore, distillate inventories have averaged 8.2 million barrels in recent weeks, which is on par with levels seen before the war in Iran but below the 2025 average of 9.6 million. “Several emerging markets in Asia have been hit quite hard by the situation,” said Andrea Pescatori, deputy director of the International Monetary Fund's Asia and Pacific Department, at a petroleum industry conference in Singapore.
The situation was further aggravated by the September 10 drone attack on Saudi Arabia's east-west oil pipeline. According to Bloomberg, Saudi Aramco told European refiners last week that it would not deliver crude oil to them in October under long-term contracts, forcing European buyers to compete with Asian refiners for additional shipments, which pushed prices on the European physical market above $120 a barrel.
No other players are promising relief either. Russia has extended its ban on diesel exports until the end of October, and the loss of Middle Eastern refining capacity is expected to persist. Analysts say record-high refining margins – the so-called crack spread for U.S. diesel, meaning the price difference between crude oil and diesel, reached $118.62 a barrel on September 14 – could encourage increased production. However, any escalation of the wars in Iran or Ukraine, or a major refinery outage, could trigger another price spike.
“Based on the current fundamentals, higher prices are likely to stay with us for a while yet”
said Alex Hodes, director of energy market strategy at StoneX.
Ugar
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