The Paris-based agency said in its October oil market report that recovering refinery production would be insufficient to replenish depleted inventories before the second half of next year. Persistent shortages have pushed diesel prices to record levels, raising transport, manufacturing and distribution costs across major economies.
Global diesel exports fell by approximately 700,000 barrels per day in September compared with a year earlier. Combined shipments from the Middle East and Russia declined by 1.3 million barrels daily, with additional exports from other suppliers only partially compensating for the disruption.
The agency estimated that net diesel and gasoil exports from the two affected regions dropped more than 60 per cent year-on-year to 820,000 barrels daily. Damage to energy infrastructure, restrictions on maritime movements and reduced refinery operations have compounded the supply losses.
Wholesale diesel prices exceeded $200 per barrel in Singapore during September and reached approximately $220 in Europe and the United States. Although quotations subsequently eased, benchmark prices remained nearly twice their pre-conflict levels and substantially above crude oil prices.
Diesel refining margins, representing the premium of refined fuel over crude, approached $95 per barrel during September. Such unusually high margins reflect the shortage of available fuel rather than an overall scarcity of crude alone.
The IEA warned that elevated diesel costs were already increasing goods prices, eroding household purchasing power and weakening economic activity. Diesel remains essential for road freight, agriculture, construction and industrial machinery, making consumption comparatively resistant to price increases.
Global diesel demand nevertheless declined by 1.1 million barrels daily from a year earlier during the second quarter, reaching 28.5 million barrels daily. Consumption contracted by another 750,000 barrels year-on-year during the third quarter, averaging 28.7 million barrels daily.
China and Europe accounted for substantial portions of the reduction, while higher heating fuel prices encouraged consumers to postpone purchases. Governments seeking to cushion households and businesses from rising energy bills have helped sustain demand for transport diesel.
The supply squeeze has intensified ahead of the northern hemisphere winter, when heating requirements normally increase. Instead of accumulating seasonal reserves, fuel markets experienced further inventory withdrawals during the third quarter.
The agency expects global refinery throughput to reach a seasonal low of 81.3 million barrels daily in October before recovering to 84.6 million barrels by December. However, stronger processing volumes are unlikely to eliminate the accumulated shortage.
Diesel markets could return to a modest surplus during the first quarter of 2027, allowing inventories to rise along normal seasonal lines. The agency cautioned that these additions would not compensate for the exceptional depletion experienced throughout 2026.
Global observed oil inventories were 509 million barrels below their end-February levels by September, while onshore stocks remained near their lowest levels since at least 2016.
The IEA also revised its broader petroleum outlook, forecasting a decline of 2.6 million barrels daily in global oil demand during 2026. Consumption is expected to recover by two million barrels daily next year, remaining below its 2025 level.
Global crude and liquids production increased by 2.5 million barrels daily in September to 102.3 million barrels, supported by recovering Gulf output. Nevertheless, renewed attacks on infrastructure and shipping have left the recovery vulnerable.
Middle Eastern refined petroleum exports have recovered considerably more slowly than crude shipments. Regional product exports remained below half their pre-war volumes in September, restricting the availability of diesel in importing markets.
Russia’s decision to ease diesel export restrictions is unlikely to produce substantial additional supplies because damaged refinery capacity remains the principal constraint, the agency said.
Higher tanker freight costs have also undermined refinery profitability across Europe and Asia, raising the possibility of production reductions at facilities operating with weaker margins.
The Group of Seven countries agreed on 2 October to accelerate emergency petroleum stock releases, prioritising diesel deliveries under the IEA’s collective action programme established in March.
IEA executive director Fatih Birol subsequently urged member governments to accelerate outstanding commitments and consider supplementary diesel releases where appropriate.
The agency’s governing board is scheduled to review those measures on 15 October, including the availability of additional emergency supplies and the timing of deliveries to markets facing the greatest pressure.
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