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Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,…

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.

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.

Related: Saudi Aramco Offers Discounted Oil to Europe as Exports Recover

Adding to the limited fuel exports out of the Middle East is the crash in Russian diesel exports as half of Russia’s refineries have been offline for months, due to Ukrainian drone hits, prompting a domestic fuel crisis and a ban on diesel exports.

This ban was partially lifted earlier this month when U.S. President Donald Trump announced a deal with Putin for Russia to supply diesel to the U.S. The first tanker shipping about 40,000 metric tons, or about 300,000 barrels, of ultra-low sulfur diesel (ULSD) out of Russia to the U.S. departed from the Russian Baltic Sea port of Primorsk last week.

“On November 7, the first vessel, carrying a measly 300,000 barrels, less than a tenth of what the US consumes every day, should arrive in New York,” Robin Mills, chief executive of energy advisory firm Qamar Energy, wrote in The National.

Analysts acknowledge that the ‘Russian diesel deal’ would have negligible effects on global diesel supply and prices, and certainly not ahead of the U.S. midterm elections on November 3.

There aren’t immediate supply-side solutions significant enough to ease the upward pressure on diesel prices as winter approaches and heating oil demand in the Northern Hemisphere will jump, especially in the United States.

According to Qamar Energy’s Mills, “the strategic choice is to save on consumption, whenever and wherever possible.”

These could include heavy-duty vehicles running on natural gas, public transportation buses on gas or battery-electric power, and a shift toward passenger electric vehicles.

The record-high gasoline and diesel prices have accelerated Europe’s shift toward EVs in a significant push away from conventional cars that lawmakers were trying to speed up for years with regulation.

But all of the above demand-side savings on diesel consumption are no immediate solutions to the global diesel crunch.

Until fuel flows from the Middle East and Russia recover to some adequate levels, the risk to prices is tilted to the upside in the near term.

Global fuel markets are set to remain tight until at least the middle of next year as the second quarter of 2027 will see unusually high planned maintenance that refiners have deferred from this year, Morgan Stanley said last week.

The expected drop in refinery utilization in the second quarter of next year would be two and a half times the usual capacity taken offline by spring maintenance globally, and is more than the capacity in the Middle East and Russia that’s currently offline, according to Morgan Stanley’s analysts.

The IEA also warned in its monthly Oil Market Report for October that the current crunch in the diesel and gasoil markets is set to extend into the middle of next year.

Amid the supply crunch, prices in the U.S. are not easing even after the Administration used every available tool to provide relief.

Last week “Diesel edged modestly higher nationally, and with the national average for gasoline likely to remain above $4 per gallon and diesel above $6 heading into the U.S. election, the relief motorists and policymakers have been hoping for remains elusive—even as states have moved to cut fuel taxes and the Trump administration has pulled virtually every lever available,” Patrick De Haan, head of petroleum analysis at GasBuddy, said on Monday.

With a week to go to the election, U.S. gasoline prices are 42.3c/gal above 2022’s election day average, which was the priciest Election Day at the pump ever, De Haan noted. Diesel is nearly $1/gal above 2022’s $5.33/gal. Both are on track for the highest Election Day prices on record (not all-time highs), the analyst said.

By Tsvetana Paraskova for Oilprice.com

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