Diesel Crunch Intensifies as Refining Capacity Falls Short
The global diesel market is bracing for further tightening in the coming months, threatening to push fuel prices even higher and potentially exacerbating inflation concerns. Industry officials are warning that the worst of the diesel crisis has yet to be seen.
Russell Hardy, chief executive of Vitol Group, emphasized the inflexibility of global fuel markets, despite a recent uptick in crude oil flows from the Persian Gulf. He noted that only about 1 million barrels per day out of an estimated 10 million bpd outbound flows are refined products.
The refining capacity constraints are being felt across various regions, including the Middle East, where Iranian strikes on refineries and restricted fuel flows through the Strait of Hormuz have had a significant impact. Refinery capacity in Russia is also severely restricted due to Ukrainian drone strikes and an export ban on diesel until at least September.
Even US refineries are running at maximum capacity, having delayed maintenance during the summer months, but it remains uncertain whether they can sustain these elevated utilization rates for much longer. If the global refining system can maintain current processing rates until year-end, Shaikh Khaled Ahmad Al Sabah of Kuwait Petroleum Corporation considers this an achievement.