APPEC Warns Global Diesel Market to Tighten Further as Refining Capacity Falls Short

The global diesel market is already at record price levels. At the APPEC oil conference in Singapore, industry officials said the diesel market has yet to experience its worst phase.

Russell Hardy, chief executive of Vitol Group, said at the conference that although crude exports from the Persian Gulf have increased in recent weeks, the global fuel market remains very tight and inelastic. He said refining capacity is still insufficient to prevent inventory declines, and surplus stocks worldwide continue to be drawn down. Of the roughly 10 million barrels per day of export flows through the Strait of Hormuz, only 1 million barrels per day is refined product, with the rest crude. Middle East refining capacity has been constrained by Iran's strikes on refineries and by restricted fuel flows through the Strait of Hormuz.

Russian refining capacity has been severely constrained by near-daily Ukrainian drone attacks, and Russia has banned diesel exports, with the ban lasting at least until the end of September 2026. Refineries in the United States and elsewhere deferred maintenance in the summer of 2026 and ran at maximum capacity, but it will be difficult to sustain such high utilization rates for much longer.

Sheikh Khaled Ahmad Al-Sabah, managing director of international marketing at Kuwait Petroleum Corporation, said that if the global refining system can maintain current processing rates through the end of 2026, that would be an achievement. He said northwestern Europe will face a very difficult winter, and that this is only the beginning.