IEA Says Diesel Supply Will Stay Tight Into Second Half of 2027 as Inventories Fall Short

Since the Iran war began in late February, diesel has gone from a trucker's complaint to a global supply problem. Today, Oct. 14, the International Energy Agency put a date on how long it could last: well into 2027.

In its October Oil Market Report, the IEA said it does not expect lost diesel inventories to be replenished, beyond normal seasonal swings, before the second half of 2027. That holds even with a rapid recovery in refinery output expected by year-end. The agency said gasoil supply still "falls short of meeting demand in 4Q26."

The numbers behind the squeeze

Global diesel exports fell by 700,000 barrels a day in September from a year earlier, the IEA said. Russia and the Middle East together lost 1.3 million barrels a day of exports. Higher supply from other sources only partly made up the gap.

Combined net exports from the Middle East and Russia dropped more than 60% in September, according to the agency. Gasoil exports averaged 4.7 million barrels a day over the first nine months of 2026, down 10% from a year earlier. Increased shipments from the U.S. and China offered only partial relief.

The damage shows up in prices. Wholesale diesel topped $200 a barrel in Singapore in mid-September, and hit all-time highs of about $220 a barrel in Europe and the United States, the IEA said. Diesel refining margins, the premium over crude, reached nearly $95 a barrel in September, a record.

Retail prices followed. The American Automobile Association put the U.S. average at about $6.30 a gallon on Oct. 7, after a record $6.52 at the end of September. Regular gasoline averaged $4.36.

Why crude recovered and diesel did not

The Strait of Hormuz is open this week and crude shipments are recovering. Crude is moving through at about 76% of prewar levels, according to Wall Street Journal reporting. Refined products make up just 11% of cargoes, down from more than 20% before the war.

JPMorgan analysts said "the crude market has largely normalized even as refined product supplies remain constrained." Missile strikes and other war-related outages have knocked Middle East refineries offline. The IEA said a rapid refinery recovery toward year-end will start rebuilding stocks but cannot erase the deficit built up this year.

Russia is the other hole. Ukrainian strikes have cost it roughly half its diesel refining capacity, and Moscow imposed a near-total diesel export ban starting in July.

The IEA said the winter timing is the problem. Heavy counter-seasonal stock draws in the third quarter "deprived global gasoil markets of crucial stock cover ahead of the peak winter demand season."

Demand has not backed off

Higher prices have cut oil demand overall, but diesel is the exception. The IEA described diesel demand as "relatively price inelastic" and said it has stayed strong, partly because of government measures meant to ease consumer prices.

Global oil demand is forecast to fall by 2.6 million barrels a day in 2026, and 25% of that decline comes from diesel. The IEA also projects global supply down 5.8 million barrels a day this year, then up 7.7 million in 2027, which would push the market back into surplus.

The agency said record diesel prices are "raising the cost of goods and impacting real incomes, economic activity, and inflation."

Stockpiles and the Russia question

The cushion is thin. The U.S. Strategic Petroleum Reserve held 283.8 million barrels last week, a level not seen since 1982, according to Energy Department figures. That follows the 172-million-barrel release President Trump ordered in March. Saudi Aramco CEO Amin Nasser called the world's supply cushion "scarily thin" on Monday.

G7 leaders agreed Friday to release 100 million barrels of oil and diesel from emergency reserves over four months, with much of the diesel going out in the first 20 days. Andy Lipow, president of Lipow Oil Associates, told NBC News the release "could temporarily reduce diesel prices by 25 cents per gallon but does little to increase refinery capacity to produce more."

The White House had been preparing a 90-day diesel export ban, Politico reported, but dropped it after the G7 agreement. "Europe has a lot of diesel, and they're going to be making a major world contribution, and so are we," Trump said last week. "And we're not going to be doing the export ban."

Trump's other supply move was a deal with Vladimir Putin for Russia to send 300,000 metric tons of diesel to the global market. It drew criticism from both parties in Washington. Today at the IMF meetings in Bangkok, European Commissioner Valdis Dombrovskis said, "now is not a time to ease sanctions on Russia."

The administration's case is that more barrels on the market means lower pump prices. The IEA's numbers show how large the shortfall is: the 300,000 metric tons in the Russia deal is small against a 1.3 million barrel-a-day export loss.

What comes next

The IEA warned that tensions in crude freight markets could push delivered diesel prices higher again in the coming weeks in Europe, Africa and Latin America, the largest gasoil-importing regions. Whether the G7 release and the refinery restarts arrive before winter demand peaks remains unclear.