Global diesel supply constraints could persist into 2027 as disruptions to Middle Eastern and Russian exports, reduced refinery output, and declining inventories leave markets struggling to meet demand ahead of peak winter consumption, the International Energy Agency (IEA) said in its October 2026 Oil Market Report.
Diesel refining margins, which measure the premium of diesel prices over the cost of crude oil, climbed to a record high of nearly $95 per barrel in September as attacks on energy infrastructure linked to the Iran and Ukraine conflicts reduced refining capacity. The IEA warned that the resulting high fuel prices are increasing the cost of goods, weakening real incomes and economic activity, and adding to inflationary pressures.
Although global refinery operations are expected to recover toward the end of 2026, the additional output is unlikely to offset the supply deficit accumulated during the year. The IEA expects diesel and gasoil supplies to remain tight into 2027, with inventories unlikely to recover before the second half of the year.
Combined diesel export losses from the Middle East and Russia reached 1.3 million barrels per day (mmbbl/d) in September, contributing to a year-on-year decline of 700,000 bbl/d in global diesel exports. The agency said prolonged supply disruptions had forced inventories to fall ahead of autumn refinery maintenance and peak winter demand.
The pressure on diesel markets comes despite expectations of weaker global oil demand. The IEA forecasts global oil demand to decline by 2.6 million bbl/d in 2026, with diesel accounting for approximately 25% of the reduction. Global oil supply is projected to fall by 5.8 million bbl/d this year before increasing by 7.7 million bbl/d in 2027, potentially returning the market to an overall surplus.
To ease supply pressures, IEA member countries are coordinating emergency oil stock releases, including a Group of Seven (G7) initiative to release 100 mmbbl crude oil and petroleum products, with priority given to accelerating diesel supplies. However, the agency cautioned that declining inventories are reducing the market’s capacity to absorb further supply shocks while geopolitical tensions continue.
On October 7, the IEA was expected to work out the details of the G7’s planned 100-million-barrel release at its October 14-15 governing board meeting. The G7, an informal forum of heads of state and government, had agreed on October 2 to coordinate the release over four months, with a substantial portion of diesel supplies to be made available during the first 20 days. The initial announcement did not specify the allocation between crude oil, diesel, and other petroleum products or provide a country-by-country breakdown.
The initiative followed a separate 400-million-barrel emergency stock release announced by the IEA in March 2026. According to the IEA’s October report, 331 mmbbl under that action had been released by the end of September, while the pace of releases had slowed significantly. The agency warned that further inventory drawdowns would leave smaller reserves available to cushion future disruptions.
The IEA’s October 2026 Oil Market Report also highlighted the fragility of the recovery in Middle Eastern oil exports. Although crude shipments from Gulf producers increased in September, refined-product exports remained severely constrained, leaving diesel availability under pressure. The agency said that a sustained recovery in product supplies from the Middle East would be essential to easing the market deficit in 2027.
