Why Diesel Is Tight Even When Crude Oil Isn’t

Diesel markets are under pressure because the disruption is concentrated at the point where crude becomes usable fuel. Damage and curtailed operations at refineries in Russia and the Middle East, restrictions on Russian exports, and impaired tanker movements have reduced the supply and delivery of diesel, jet fuel and marine fuels. That leaves far less flexibility to replenish stocks before peak winter consumption. 12

The constraint is refined fuel, not necessarily crude

Crude oil and diesel are related but not interchangeable. A refinery must process crude into middle distillates such as diesel and jet fuel, and the fuel must then reach buyers by ship, pipeline or truck. When refinery runs or product shipping are disrupted, crude prices can be less strained even as diesel becomes scarce.

Industry executives at the Asia-Pacific Petroleum Conference described the shortfall as a products problem: roughly 2 million barrels per day of supply missing from Russia and nearly 2 million bpd from the Middle East, alongside limited spare refining capacity elsewhere. 1 The International Energy Agency estimated that Middle Eastern processing was 2.9 million bpd below pre-war levels in the second quarter and would remain 2.2 million bpd lower in the third quarter.

This distinction explains why a softer crude market does not automatically bring relief at the fuel pump. Reduced refinery activity can lower demand for crude while also producing fewer barrels of diesel and jet fuel.

How the wars are tightening supply

Russia: refinery attacks and an export ban

Ukrainian attacks on Russian refineries have disrupted a major supplier of petroleum products. Russia subsequently restricted diesel exports, removing barrels from the international balancing market and forcing regular buyers to seek replacement supplies elsewhere. 56

Russia extended its ban on diesel exports by producers through September 30. The measure also covers marine fuel and gasoils; separate restrictions apply to diesel exports by non-producers, motor gasoline and jet fuel on longer timelines. 4 Even buyers that do not import Russian diesel directly can feel the effect because other importers compete for the same alternative U.S., European and Asian cargoes. 5

Middle East: less processing and harder shipping

The Iran conflict has impaired refinery processing and tanker traffic in the Middle East, cutting both the volume of products made and the efficiency with which available cargoes can be delivered. 12 The result is a double constraint: fewer products leave refineries, and logistics frictions make each barrel harder and costlier to move.

Refiners have also favored diesel and other higher-value products over fuel oil. That choice may ease one shortage while creating another: fuel oil used by ships and power plants is expected to remain critically tight as refiners prioritize diesel output. 2

What record diesel prices and margins are signaling

The price signals point to prompt scarcity. On September 3, the U.S. average diesel price reached a record $5.820 a gallon, according to GasBuddy, while the U.S. diesel crack spread—roughly the premium for turning crude into diesel—reached an intraday record of $108.02 a barrel.

A rising crack spread is important because it shows that the pressure is not just a more expensive barrel of crude. It reflects a much higher value for the refined diesel barrel relative to its feedstock. In practical terms, buyers are bidding aggressively for available middle distillates.

High refining margins normally encourage refineries to raise output. But the APPEC discussion highlighted the lack of spare refining capacity, limiting how quickly the industry can respond. 1 This makes inventories especially important: thin stocks provide less protection against a cold winter, unplanned refinery outage or another disruption to tanker traffic.

Why Asia and China matter to the global balance

Asia’s imports of light and middle distillates fell to an estimated 5.10 million bpd in August, down from 5.61 million bpd in July and the lowest level since the war began, according to Kpler data cited by Reuters. 3 Lower regional imports are evidence of constrained availability, not necessarily an easing of fuel-market stress.

China’s seaborne crude arrivals were 7.14 million bpd in August, up slightly from July but nearly 40% below pre-Iran-conflict levels. Lower crude imports and reduced refinery processing can restrain global crude demand, yet they also limit the potential supply of refined-product exports that might otherwise help relieve Asian markets.

For fuel-consuming economies, elevated diesel, jet-fuel and marine-fuel costs can pass through to freight, industrial operations, food distribution and travel. The scale of the effect will depend on local inventories, refining access, currency moves, government fuel policies and the duration of disruptions.

What to watch through 2027

The most likely near-term outcome is continued volatility in refined-product prices rather than a simple, sustained rise in crude prices. The market could ease if damaged refineries return, Russian exports resume, Middle East shipping normalizes, or demand weakens sufficiently to rebalance supply. Conversely, low inventories and limited spare capacity make diesel prices unusually vulnerable to fresh disruptions. 12

Longer-dated market pricing has reflected that risk: Reuters reported in August that European diesel futures were trading around 35% above their 2024–25 average through 2027, while U.S. heating-oil futures were about 42% above that average. Those prices are market expectations, not guarantees. They underline the central lesson of the squeeze: restoring crude supply alone will not fully resolve it unless refining capacity and fuel trade routes recover as well.

Bottom line

The global fuel squeeze is a bottleneck in refining and logistics. Russia’s export restrictions, war-related refinery damage and Middle East shipping disruption have removed flexible supplies of diesel and related fuels at a time when winter demand is approaching. Record diesel margins indicate that the marginal refined barrel is scarce; without more operational refining capacity or smoother trade flows, the market remains exposed to abrupt regional shortages and price surges. 1