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Diesel supply crunch may worsen as refining capacity remains tight
Industry officials warn the global diesel market could tighten further, with limited refining output and export constraints keeping fuel prices high.
A tightening global diesel market is expected to worsen in the coming months, keeping fuel prices elevated and adding pressure to broader goods prices, industry figures warned at the APPEC petroleum conference in Singapore this week, according to OilPrice.
Industry officials said the stress in oil markets is currently concentrated in diesel, with refining capacity not running enough to offset demand. Vitol Group chief executive Russell Hardy said producers are still not operating at levels that prevent inventory draws, even as crude flows out of the Persian Gulf have increased in recent weeks.
The outlet pointed to infrastructure and disruption factors limiting refined product availability. Out of an estimated 10 million barrels per day of outbound flows, only about 1 million bpd are refined products, with refinery capacity constrained in the Middle East due to Iranian strikes on refineries and reduced throughput through the Strait of Hormuz.
Refinery capacity is also constrained in Russia amid nearly daily Ukrainian drone strikes on refineries, and Russia has banned diesel exports until at least the end of September. OilPrice added that refineries in the United States and elsewhere have run at maximum capacity through the summer after delaying maintenance.
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