Diesel Shortage Deepens as Middle East Conflict Tightens Oil Markets

The global oil market is facing a severe diesel supply squeeze due to ongoing conflicts in the Middle East and disruptions to Russian refining and exports. According to the International Energy Agency's latest Oil Market Report, global oil demand is expected to fall by 2.5 million barrels per day (mb/d) in 2026 as a result of these prolonged disruptions.

Diesel prices have surged, with US prices exceeding $200 per barrel in early September, representing a 94% increase compared to pre-war levels. Other refined product markets are also experiencing significant price increases, with ICE Brent futures trading at around $105 per barrel, up $21 from the start of August and 45% above pre-war levels.

The disruptions have resulted in a significant reduction in oil exports from Gulf countries, which were estimated to be around 13 mb/d in August, nearly half their pre-war level. Refined product exports, including diesel and gasoil, are also severely impacted, with net exports from Gulf countries averaging just 390 kilobars per day (kb/d) in August, a quarter of pre-war levels.

The IEA warns that shrinking inventories and limited spare refining capacity leave the global oil market increasingly exposed to further disruption. The agency expects global refinery throughput to decline by 2.6 mb/d to 81.5 mb/d in 2026, with refineries operating at high utilisation rates to capture exceptionally strong margins.