Global diesel supply to stay tight through winter, energy executives warn

The international diesel market faces a prolonged crunch that is expected to keep supplies tight through the upcoming winter heating and logistics season, major energy executives warned.

The wars in Ukraine and Iran have impacted refineries in Russia and the Middle East, pushing diesel margins to record levels in Europe and the U.S., while reducing crude ​supplies to Asia.

Senior industry ‌executive, Vitol CEO Russell Hardy told the APPEC conference on Tuesday,"There's really a shortage of products because we're missing 2 million barrels a day from Russia, and we're missing nearly 2 million ⁠barrels a day from the Middle East."

Hardy said crude is in a better supply position than products as the Middle East is exporting about 9 million bpd of crude and 1 million bpd of products.

"We're still not running enough refining capacity to prevent those draws," he said.

"We keep eating into the surplus that exists around the world, and we're pretty much at the bottom of our stockpiles."

Speaking on market conditions, leadership figures including Vitol Chief Executive Russell Hardy highlighted that while crude oil markets have experienced varied pricing pressures, refined petroleum products are dealing with a distinct structural deficit.

Mark Senn, senior vice president of global trading at Phillips 66 (PSX.N), opens new tab, said most ‌U.S. ⁠refineries were already running flat out.

"When you're looking forward to a winter season coming where diesel stocks are quite deficit, you're setting up for an environment where that strength could continue in those markets," he added.

As reported, the primary drivers behind the persisting tightness include a persistent lack of spare global refining capacity, ongoing geopolitical disruptions impacting key maritime trade routes, and extended export bans from major producers like Russia.

The convergence of these factors has left regional inventories—particularly in Europe and parts of the Atlantic Basin, sitting at historically low seasonal buffers.

Analysts note that consecutive years of refinery rationalization, coupled with recent infrastructure constraints and regional feedstock volatility, mean global output cannot easily scale up to meet winter heating oil and industrial transport demands.

Consequently, buyers across Europe, Latin America, and developing markets continue to compete aggressively for a shrinking pool of spot cargoes, keeping crack spreads elevated and raising risks for downstream commercial logistics.