The Diesel Crisis Is Here To Stay

The diesel crunch is set to persist well into 2027 as supply remains limited by the Middle East conflict and the damaged Russian refineries, analysts say. Attempts at transient small supply-side solutions like the Trump-Putin diesel deal are not expected to move the needle in the very tight global market. Until refineries in the Middle East, damaged by Iranian strikes, return to full operations, oil product flows through the Strait of Hormuz recover, and Russia's diesel exports rebound, the world's supply of diesel will remain below 2025 levels.

Supply Crunch The rest of the world, including the United States, is producing at full capacity, but it is unable to fully offset the lost supply. Refineries outside the Middle East and Russia have deferred maintenance to produce as much diesel as they can over the past few months. But they cannot delay scheduled maintenance indefinitely because they risk malfunctions and unplanned shutdowns, which would make the supply situation even worse.

Flows of crude oil through the Strait of Hormuz may have recovered to nearly pre-war levels, according to many ship-tracking services, but fuel exports remain limited and are more dangerous to ship out of the Persian Gulf because cargoes are more flammable in case of a strike on a vessel. Fuels are also typically being shipped on smaller tankers.

Shipping is not the only although it's the biggest issue for the Middle East's oil supply. Refineries including Bapco in Bahrain and Jizan in Saudi Arabia were hit by Iranian strikes in the early weeks of the war. Bapco is now back to three-quarters of full capacity, but Saudi Aramco's 400,000-barrel-per-day Jizan refinery, a major refining hub on the Red Sea, is still shut following multiple hits over the past few months.