Diesel prices hit record highs and the IEA says relief is still years away

The International Energy Agency expects global diesel and gasoil markets to remain under significant strain well into 2027, with depleted inventories unlikely to be replenished before the second half of next year.

The agency’s warning rests on a 1.3 million barrel-per-day supply shortfall from Russia and the Middle East, which has outweighed incremental increases from other suppliers. Global diesel exports in September were 700,000 barrels a day below year-earlier levels, while gasoil markets tightened against seasonal norms in the third quarter of 2026.

Prices have reflected the squeeze. Singapore diesel prices rose above $200 a barrel in mid-September, according to the IEA’s October Oil Market Report, while Europe and the United States recorded highs of roughly $220 a barrel. Retail diesel prices have reached record levels in most major economies.

The IEA said demand has held up even at those levels. 'Relatively price inelastic diesel demand has remained strong,' it said, meaning users have continued buying fuel despite higher prices. Diesel will account for 25% of the 2.6 million barrel-per-day annual decline in global oil demand the agency forecast for 2026.

Refineries are expected to raise throughputs towards year-end, yet gasoil supply will still fall short of demand in the fourth quarter. Higher global refinery output is expected to move the market into surplus in the first quarter of 2027. The IEA said that surplus will not erase the deficit accumulated during 2026.

The central uncertainty is product supply from the Middle East. The agency said the market’s balance depends on a recovery there.

President Donald Trump has announced a deal with Russian President Vladimir Putin to release Russian diesel into global markets, beginning with 300,000 metric tons immediately. Goldman Sachs estimated that early shipments would reduce wholesale diesel prices by only $1 to $2 a barrel in Europe and along the US Gulf Coast.

The cost reaches beyond fuel buyers. Record diesel prices are already lifting the cost of goods and weighing on real incomes, economic activity and inflation.