Diesel crisis warning from the International Energy Agency

"Despite low demand, limited middle distillate supply seems likely to continue until 2027, while oil market balances are estimated to continue to be in deficit until the end of the year," the International Energy Agency (IAA) said in its monthly report.

The agency stressed that diesel is "under extreme pressure" due to supply disruptions.

Although oil supplies from the Persian Gulf jumped to more than 75 percent of pre-war levels last month thanks to tanker shuttles, the unsafe and dangerous security environment prevented the agency from increasing its supply forecasts.

Paris-based IEA stated that high prices and supply constraints are putting pressure on global demand, with demand set to fall by 2.5 million barrels per day this quarter and facing a weaker outlook. Diesel accounts for 25 percent of this decrease.

Market balances, stock consumption and 2027 projections

IEA assessed that "Dieseline market balance will remain tight until 2027 and will depend on the recovery of product supplies from the Middle East. If this does not happen, further demand reductions and the heavy economic costs they will entail may be required to balance the markets."

World oil consumption will fall by 2.6 million barrels per day this year, a slightly steeper decline than predicted in last month's report, and remains on track for the largest annual average loss since the 2020 pandemic. Demand will average 102.4 million barrels per day.

The agency made a larger cut in its 2027 demand growth forecasts for the first time since its introduction in June. Global consumption will increase by about 2 million barrels per day next year but will remain slightly below 2025 levels, unable to fully offset the wartime shock.

Taking into account downward revisions in demand, the agency's global supply deficit forecast for this year narrowed to 1.68 million barrels per day for the first time since July. The surplus projected for 2027 has expanded. Depletion of stocks during the war left observed global inventories 509 million barrels below pre-conflict levels and onshore stocks near the lowest level in at least a decade.

“As remaining buffers in the system continue to erode, oil markets may experience further turmoil in the coming months before an eventual glut that could emerge in 2027 if a solution to the conflicts in the Middle East is not found,” the IEA warned.