Global diesel markets are facing ongoing supply challenges with shortages expected to persist until at least mid-2027, according to the International Energy Agency (IEA). The Paris-based agency cited disruptions from conflict in the Middle East and refinery attacks in Russia as key factors draining diesel inventories worldwide, contributing to record-high prices and economic concerns.
Diesel prices have surged to unprecedented levels in recent months, with wholesale prices hitting around $220 per barrel in Europe and the United States—more than double the rates observed before the outbreak of the Middle East conflict earlier this year. In the U.S., diesel pump prices averaged $6.28 per gallon as of early October. Despite these high prices, the IEA noted that demand has only marginally decreased due to diesel’s integral role in sectors such as road transport, agriculture, and industry, making it closely tied to overall economic activity.
The agency’s monthly oil market report highlighted that supply constraints remain acute despite anticipated increases in refinery activity toward the end of 2026. However, refinery restarts, including discussions on reactivating outdated facilities revealed at the recent World Petroleum Congress in Riyadh, are expected to take at least six to twelve months and involve steep costs. Consequently, tight market conditions and elevated diesel refining margins—reaching near-record premiums over crude oil prices—are likely to sustain elevated prices well into the next year.
The IEA also pointed out that easing sanctions on Russian diesel exports would have limited effect in alleviating the supply crunch as Russia’s operational refinery capacity remains severely constrained. Meanwhile, increased hostilities and attacks on energy infrastructure and shipping lanes in the Gulf continue to threaten a full recovery of Middle Eastern crude exports, which, while partially rebounded to approximately 75% of pre-war levels in September, face ongoing risks of disruption.
On the demand side, the IEA forecasted a global oil demand decline of 2.6 million barrels per day in 2026, influenced by a notable reduction in China and several emerging markets. The agency noted that gauging demand shifts is complicated by a lack of timely reporting in many countries, especially across Africa, Latin America, and Asia. Analysis of seaborne oil deliveries suggested southeast Asia has been the most affected region, with a 3.7% decrease in deliveries during the first six months of the conflict period, contrary to previous projections of demand growth.
Regionally, the IEA reported that oil demand in Africa, which had been growing at an estimated annual rate of 3.4% pre-conflict, reversed, showing a 2.5% contraction between March and August 2026, exacerbated by the continent’s reliance on imported diesel and petrol. In contrast, Latin America demonstrated some resilience, with demand increasing by an estimated 1.9% year-on-year during the six months following the conflict's onset.
Governments and market observers are closely monitoring the situation, with many considering further releases from emergency oil reserves to relieve supply pressures. The initial coordinated release of 400 million barrels by IEA member countries in March—prompted by the US-Iran war—has largely been utilized, and discussions continue around the timing and scale of additional interventions. However, regulatory requirements, such as the European Union’s emergency stock obligations, may limit further drawdowns.
Looking ahead, the IEA forecasts global oil supply to decline significantly in 2026 before rebounding in 2027, although ongoing geopolitical risks and maintenance schedules for refineries could delay marked improvements in diesel availability. Until then, the agency warns the diesel market will remain tight, sustaining elevated prices and adding inflationary pressures across global economies.