Diesel Crunch Set to Worsen as Refining Capacity Falls Short, Industry Warns

Industry participants at this week’s APPEC petroleum conference in Singapore cautioned that the global diesel market is likely to tighten further in the months ahead, keeping fuel prices elevated and lifting the cost of goods worldwide. Analysts at the meeting said the current strain in oil markets is concentrated in diesel, with the sector described as markedly constrained. Speakers pointed to a mismatch between crude flows and refined product output. Although crude shipments out of the Persian Gulf have increased, only around 1 million barrels per day of the roughly 10 million bpd outbound flows are refined products, leaving the bulk as crude and limiting immediate relief for diesel supplies. Regional disruptions and capacity limits are compounding the problem. Executives said Middle East refineries have been hit by Iranian strikes and Russia’s refining system has been crippled by near-daily Ukrainian drone attacks, while Moscow has also imposed a diesel export ban through at least the end of September. Refineries in the United States and elsewhere have been operating at unusually high utilization after postponing maintenance, but officials warned those rates are unlikely to be sustained for long. Speakers warned that maintaining current processing rates through year-end would be a significant feat, and several executives signaled the risk of pronounced supply stress this winter in parts of Europe. If refining throughput slips or export restrictions persist, diesel shortages could deepen and continue to put upward pressure on prices for fuel and the goods that depend on it.