European diesel margins hit record as refinery attacks mount

A sustained campaign of Ukrainian drone strikes on Russian oil refineries, combined with militant attacks on Gulf refining infrastructure, has driven European fuel refining margins to all-time highs, sending ripple effects through the global economy as consumers and industries face mounting energy costs.

The premium that European low-sulphur gasoil futures command over crude oil prices — a proxy for diesel refining profits — hit a record $74.66 per barrel on Thursday, according to Reuters. The surge comes even as crude oil itself has retreated to around $90 a barrel, underscoring that the bottleneck has shifted from raw material supply to processing capacity.reuters

"The market is signalling that refining capacity is now as significant a problem as crude oil scarcity, if not a greater one," said Jeffrey Baird, founder of investment firm Merritt Point Partners.reuters

Attacks Cripple Capacity Across Multiple Fronts

Lukoil's refinery in Perm, with a capacity of approximately 260,000 barrels per day, shut down one of its crude distillation units on Thursday after a drone attack — the latest in a series of Ukrainian strikes that have forced the Kremlin to impose gasoline and diesel export bans. Saudi Arabia shut its 400,000 bpd Jizan refinery on July 27 following an attack by Yemen's Houthis, while parts of Kuwait's 615,000 bpd Al-Zour refinery also went offline due to a power cut.aol+1

European gasoline margins are near four-year highs, with the Eurobob gasoline premium to Brent futures at $42.21 per barrel on Wednesday. Jet fuel margins remained above $80 per barrel — a level never reached before 2026, according to LSEG data.reuters

India Steps In to Fill the Gap

Reliance Industries ramped up diesel exports from its Jamnagar refinery to Europe in July, shipping 4 to 5 million barrels — the highest in 10 months — according to data from Kpler, Vortexa, and trade sources cited by Reuters. Exports to Brazil are on track to reach an 11-month high of 2.8 million barrels as Russian supplies to the country fell to nearly four-year lows.economictimes

Energy Aspects expects Europe to face a shortfall of 833,000 barrels per day of middle distillates in the third quarter.economictimes

Winter Energy Concerns Mount

The diesel crunch compounds broader energy security worries. European gas storage sits just above 50% full — well below the EU's 90% November target — after the war against Iran crippled Qatar's LNG export infrastructure earlier this year. Wood Mackenzie warned that at current import rates, storage could reach only 75% by November.oilprice

"Product markets are far tighter than crude markets," Amrita Sen from Energy Aspects told the Financial Times. "Products are what you and I pay for; we don't pay for crude".oilprice