Global diesel shortage expected to last into 2027

A global diesel shortage driven by the wars in Iran and Ukraine is unlikely to ease before next year, according to storage market data and industry participants, extending a fuel-cost spike that is straining economies from the United States to Southeast Asia.

U.S. diesel inventories fell to 107.9 million barrels by Sept. 11, the lowest level for that point in the year since records began in 1982, according to the U.S. Energy Information Administration. Retail diesel prices topped $6 a gallon this month for the first time, with AAA reporting a record $6.23 per gallon on Sept. 14. The shortage is squeezing farmers, truckers, and manufacturers who depend on the fuel.thenationalnews+2

Storage Tanks Go Unleased

One of the clearest signs of prolonged tightness is emerging in the diesel storage market. Refiners and traders across North America are declining to renew storage leases because there is little fuel available to store, according to data from storage broker The Tank Tiger cited by Reuters ↗ 0.24%. Available diesel storage capacity in North America and the Caribbean has climbed to a four-year high of 13 million barrels for October, up from 11 million barrels in June, The Tank Tiger's chief operating officer Steven Barsamian told Reuters.reuters

"Why would you pay for a storage tank when there is no diesel to store?" Barsamian said.reuters

The combination of falling inventories and rising storage availability suggests market participants expect supplies to remain tight into at least the first quarter of 2027, Barsamian added.finance.yahoo+1

EIA Forecasts Extended Tightness

The EIA's September Short-Term Energy Outlook projects that U.S. distillate inventories will fall below 100 million barrels this month and remain below the five-year low through the end of 2026 and most of 2027. The agency raised its 2027 retail diesel price forecast by 33 cents to an average of $4.40 per gallon, citing persistent global supply tightness.axios+3

European stockpiles are also depleted. Diesel inventories at the Amsterdam-Rotterdam-Antwerp hub were 16% below the five-year average in July, according to Insights Global data cited by Reuters. In Singapore, distillate inventories have averaged about 8.2 million barrels in recent weeks, below the 2025 average of 9.6 million.reuters

Geopolitical Risks Compound the Crunch

The Sept. 10 drone attack on Saudi Arabia's East-West pipeline has compounded global supply disruption. Saudi Aramco informed European refiners last week that they would receive no crude in October under long-term contracts, Bloomberg reported. European buyers are now competing with Asian refiners for replacement barrels, pushing cargo prices above $120 a barrel in Europe's physical market.dailycaller

Russia's diesel export ban, extended through the end of October, and the continued disruption of Middle Eastern refining capacity leave few relief valves. Analysts expect record diesel refining margins — the U.S. diesel crack spread hit $118.62 a barrel on Sept. 14 — to incentivize more production, but any escalation in the Iran or Ukraine conflicts could trigger fresh price spikes.reuters

"Current fundamentals point to higher prices staying here for a while," said Alex Hodes, director of energy market strategy at StoneX ↗ 2.67%.reuters