Global diesel markets could remain under severe pressure well into 2027 as supply disruptions, depleted inventories and reduced refinery output continue to constrain the availability of the fuel, the International Energy Agency (IEA) has warned.
In its October 2026 Oil Market Report, the IEA said the diesel and gasoil market has tightened sharply because of prolonged disruptions to exports from the Middle East and Russia. The agency said the market is unlikely to rebuild the inventories lost during 2026 until the second half of 2027.
The warning comes despite signs that crude oil production and exports from major Middle Eastern producers have started to recover. The IEA said refined petroleum-product shipments have recovered much more slowly than crude flows, leaving diesel supplies particularly vulnerable.
Middle East and Russia Hit Diesel Supplies
The IEA said global diesel and gasoil availability was significantly reduced during the second and third quarters of 2026.
Supply disruptions in the Middle East, combined with falling Russian refinery output and exports, reduced global gasoil availability by about 1.5 million barrels per day in the second quarter and 1.7 million barrels per day in the third quarter compared with the same periods a year earlier.
The situation worsened in September, when global diesel exports fell by about 700,000 barrels per day year-on-year.
Combined net exports from the Middle East and Russia dropped by approximately 1.3 million barrels per day in September to just 820,000 barrels per day, representing a decline of more than 60% from a year earlier.
The United States and China increased their exports and provided some additional supply, but the extra volumes were not sufficient to fully compensate for the losses from Russia and the Middle East.
Diesel Inventories Have Been Depleted
One of the biggest concerns for the IEA is the condition of global diesel inventories.
The agency said inventories have continued to decline even though they would normally be building ahead of the Northern Hemisphere's winter heating season.
Total OECD gasoil stocks fell to about 565 million barrels in July, 5% below pre-conflict levels and the lowest level since November 2023.
Global observed oil inventories also fell by about 10 million barrels in September. A decline of 113 million barrels in onshore inventories outweighed an increase in oil held on water.
By the end of September, global observed inventories were estimated to be 509 million barrels below their pre-conflict level, while onshore stocks remained near their lowest levels since at least 2016.
The depleted stockpiles leave the market with less protection against additional supply disruptions.
Refinery Problems Are Making the Shortage Worse
The diesel shortage is not simply a result of lower crude oil production.
The IEA said refinery disruptions have become a major factor because crude must first be processed into diesel and other petroleum products before it can reach consumers.
Global refinery runs are expected to fall to a seasonal low of 81.3 million barrels per day in October before recovering to around 84.6 million barrels per day by the end of the year. The agency expects refinery runs to increase by 2.8 million barrels per day in 2027.
However, the expected recovery will initially be insufficient to rebuild the diesel inventories that have already been depleted.
The IEA estimates that diesel supply will remain below demand during the fourth quarter of 2026. As a result, meaningful replenishment of inventories outside normal seasonal fluctuations is unlikely before the second half of 2027.
Diesel Prices Have Reached Record Levels
The supply squeeze has already pushed diesel prices sharply higher.
Wholesale diesel prices exceeded $200 per barrel in Singapore in September and reached approximately $220 per barrel in Europe and the United States, according to the IEA. Although prices have subsequently eased, diesel benchmarks remain close to twice the price of crude oil and well above pre-crisis levels.
Reuters reported that the disruption has pushed diesel margins to record levels, with the loss of diesel supplies from Russia and the Middle East reaching roughly 1.3 million barrels per day in September.
The elevated prices are already affecting the broader economy because diesel is heavily used in road transportation, freight, agriculture, manufacturing and other industrial activities.
Higher diesel costs can therefore feed into the prices of goods and services as companies pass higher transportation and operating costs on to consumers.
The IEA warned that record diesel prices are already affecting real incomes, economic activity and inflation.
Global Oil Demand Is Also Falling
The diesel shortage is occurring even as the IEA expects global oil demand to weaken in 2026.
The agency forecasts that global oil demand will fall by 2.6 million barrels per day this year to an average of 102.4 million barrels per day. Demand is expected to decline by another 2.5 million barrels per day in the fourth quarter alone, with diesel accounting for about a quarter of that decline.
High fuel prices and weaker economic conditions are encouraging some consumers and businesses to reduce or delay fuel consumption.
However, diesel demand is relatively resistant to price changes because the fuel is essential for transportation and industrial activity. This means prices can remain elevated even when overall demand is weakening.
Supply Could Improve in 2027
There are signs that the situation could begin to improve next year.
The IEA expects higher refinery output to push the global gasoil and diesel market into surplus during the first quarter of 2027. That would represent an important improvement from the supply deficit expected at the end of 2026.
However, the agency cautioned that a temporary surplus would not immediately solve the inventory problem.
The large deficit accumulated during 2026 means that rebuilding global stocks will take considerably longer. The IEA therefore expects the diesel market to remain tight well into 2027.
A full recovery will also depend heavily on the restoration of petroleum-product exports from the Middle East.
Middle East Conflict Remains a Major Risk
The outlook remains particularly vulnerable to developments in the Middle East.
Crude exports from Gulf producers rose by 4.4 million barrels per day in September to 13.9 million barrels per day, bringing exports to more than 75% of their pre-conflict level. However, the IEA said renewed attacks on energy infrastructure and tanker traffic could derail that recovery.
Refined-product exports have recovered much more slowly than crude shipments. Middle Eastern refined-product exports increased by only 210,000 barrels per day in September to 1.9 million barrels per day, compared with pre-conflict levels of about 4.7 million barrels per day.
This difference is crucial for the diesel market. Even if crude production returns to normal, refineries and transportation networks must also be able to process and deliver petroleum products to international markets.
Emergency Oil Reserves Being Released
Governments have already taken steps to ease pressure on fuel markets.
G7 leaders agreed in early October to accelerate the release of oil stocks previously committed under the IEA's collective emergency response, with diesel supplies given priority.
Reuters reported that emergency stock releases had reached hundreds of millions of barrels, although the IEA said inventories remained severely depleted.
These releases can provide short-term relief, but they do not address the underlying loss of refinery capacity and export volumes.
The IEA's assessment therefore suggests that the global diesel market will require a sustained recovery in production, refining and international trade before supply conditions return to normal.
What the Shortage Could Mean for Consumers
The prolonged diesel squeeze could have consequences beyond fuel stations.
Higher diesel prices can increase the cost of transporting food, manufactured goods and raw materials. Businesses that rely on diesel-powered equipment may also face higher operating expenses.
In developing economies where diesel is widely used for transportation and electricity generation, the effects can be particularly significant.
The IEA said the elevated prices are already affecting economic activity and inflation, meaning continued supply constraints could add further pressure to consumers and businesses if the situation persists.
For now, the agency expects the market to begin moving towards greater supply availability during 2027. But because inventories have fallen so sharply, the recovery is expected to be gradual rather than immediate.
The central risk remains whether Middle Eastern and Russian fuel supplies can recover as expected. Further disruptions could prolong the shortage and increase the economic cost of already elevated diesel prices.
