On September 22, 2026, a garbage truck passes outside a Shell gas station in Carson, California, where gas prices are more than $6 a gallon and diesel prices are more than $8 a gallon.
Patrick T. Fallon | AFP | Getty Images
The International Energy Agency warned on Wednesday that diesel market constraints will continue into next year.
The IEA said in its October oil market report that supplies will remain tight until late 2027.
The IEA said anti-seasonal tightening in the gasoline market in the third quarter, combined with “larger than normal inventory declines” in the previous three months, “removed critical inventory cover from the global gasoline market ahead of the winter peak demand period.”
Global diesel exports fell by 700,000 barrels per day last month from a year earlier, IEA data showed. The loss of 1.3 million barrels per day from Russia and the Middle East was “only partially offset by increased supply from other sources,” the agency said.
However, the IEA said that while higher prices had weakened broader oil demand, “relatively price-inelastic diesel demand remained strong”, supported by government policies aimed at easing high prices for consumers.
“Decreasing inventories, rising crack prices and sharply rising backwardation levels indicate the need for additional supply.” “However, despite expectations for a rapid recovery in refinery throughput towards the end of the year, gasoline supplies will not meet demand in the fourth quarter of 2026, suggesting that, barring typical seasonal fluctuations, lost inventories are unlikely to be replenished until then (in the second half of 2027).”
The IEA noted that wholesale diesel prices exceeded $200 per barrel in Singapore in mid-September and reached record highs of about $220 per barrel in Europe and the United States.
“Diesel retail prices have risen to record levels in most major countries,” the report said. However, the company warned that tensions in the crude oil cargo market could cause delivered diesel prices to rise again in the coming weeks in Europe, Africa and Latin America, the main light oil import markets.
President Trump signs diesel deal with Russia to ease consumer pressure
As the Iran war continues to impact global energy markets, U.S. diesel prices hit $6 a gallon for the first time last month, and some market observers are warning that price increases could continue for months to come.
Last week, U.S. President Donald Trump announced an agreement with Russian President Vladimir Putin for Russia to immediately supply 300,000 tons of diesel to the global market to offset sharp price increases caused by supply constraints caused by Iran’s war.
Russian diesel exports from Baltic coastal ports resumed on Tuesday, with tankers carrying around 40,000 tonnes of ultra-low sulfur diesel heading to Morocco, according to LSEG data reported by Reuters on Wednesday.
Since Russia’s full-scale invasion of Ukraine in 2022, Russian energy has been severely sanctioned by Western governments.
The deal between President Trump and President Putin has faced bipartisan condemnation in the United States, and European lawmakers have also criticized the move. Speaking at an IMF meeting in Bangkok on Wednesday, European Commissioner for Economic Productivity Valdis Dombrovskis warned that “now is not the time to ease sanctions against Russia.”
“When discussing this diesel deal specifically, it is worth noting that the quantities being discussed have no macroeconomic significance in any case, and there is a big question mark as to whether Russia will be able to supply them in any case,” he said.
Italian Prime Minister Giorgia Meloni warned on Wednesday that the deal contradicts efforts to bring President Putin to the negotiating table with Ukraine.
Brent crude remains above $100 a barrel amid conflict-related supply disruptions
Destruction of oil demand
The IEA predicts that overall oil demand will fall by an average of 2.6 million barrels per day in 2026. Diesel will record 25% of that demand decline, the IEA said.
Meanwhile, oil supplies are expected to decline by an average of 5.8 million barrels per day this year, before reversing and increasing by 7.7 million barrels per day in 2027.
However, the IEA warned that “new attacks in the Gulf region leave the recovery vulnerable.”
Saudi Arabia’s capital Riyadh has been hit by a series of attacks by Yemen’s Houthi rebels over the past week, some of which have resulted in deaths. On Wednesday, Saudi officials announced that the administrative building of oil giant Saudi Aramco had been targeted overnight.
The IEA said in a report that the attack on Saudi Arabia risks derailing the market recovery, with Saudi production increases in September driving OPEC+ supplies increases that month.
