Diesel: prices ease, supply doesn't

In the EU, IRU’s weighted average diesel price edged up from mid-October, then fell by more than 4% in the first twelve days of November, to EUR 2.09 per litre on 12 November. That is its lowest level since early September, 8% below the September record and 28% above 27 February. Average diesel prices have remained above EUR 2 per litre since the end of July.

Diesel is most expensive in Denmark, at EUR 2.44 per litre, followed by Finland at EUR 2.37, the Netherlands at EUR 2.36 and Belgium at EUR 2.34. France, fourth at the end of October, is now mid-table at EUR 2.17: its price fell by 21 cents in twelve days as distributors passed on the savings from strategic diesel sold to them at cost.

The largest increases since February are in Bulgaria (47%), Estonia (42%), Belgium (37%), Czechia and Luxembourg (36%). Malta apart, the cheapest diesel is in Poland at EUR 1.73 per litre, followed by Spain at EUR 1.83 and Croatia at EUR 1.86, in all three cases the result of national measures; the Croatian government puts diesel at EUR 2.11 without its caps.

Gas offers no way around the problem. While diesel fell, CNG at the pump rose by a median 7% between mid-October and 12 November in the 13 EU countries with a complete IRU price series, and stands 24% above February.

In Italy and Spain, LNG has risen more than twice as fast as diesel since February: by 72% and 67%, to EUR 2.13 and EUR 1.89 per kilogram. A kilogram of LNG cost 72% of the price of a litre of diesel in Italy in February and now costs 96%. The cause is the gas market.

The Dutch TTF benchmark passed EUR 100 per megawatt-hour at the end of October, for the first time since 2022, and was at EUR 94 on 12 November, almost three times its February level, with EU storage 71% full against a seasonal norm of about 89%. More worryingly, storage levels have already started to fall instead of stabilising.

Outside the EU, Turkish diesel reached a record TRY 102.05 per litre on 6 November, after the special consumption tax rose from TRY 6 to TRY 9 on 1 November, and has since fallen back to TRY 96.76, 56% above February; the tax rises to TRY 12 on 1 December.

In the UK, diesel has barely moved: GBP 1.96 per litre, 2% below its early-October high and 39% above February. Filling a truck now costs well over GBP 1,000, against about GBP 750 before the war, according to IRU member Logistics UK.

Norwegian diesel has eased 4% from its record of 15 October, to NOK 27.06 per litre, 29% above February.

In China, diesel has risen to CNY 8.58 per litre, 30% above February and back at its April peak.

In the US, retail diesel is 58% above its February level in IRU data, at USD 1.62 per litre, down 4% since mid-October. Freight has stabilised at a low level: IRU member the American Trucking Associations’ tonnage index rose 0.8% in September but was flat on a year earlier, and the third quarter was down on both the previous quarter and the year before. The EIA has raised its forecast for retail diesel in 2027 from USD 4.49 to USD 5.03 per gallon. The federal waiver that lets trucks run on red-dyed diesel still ends on 31 December.

The IEA’s arithmetic has improved by a notch. Refinery runs hit their seasonal low of 81.3 million barrels per day in October and should reach 84.7 million in December. The agency now expects the global diesel balance to move from a small deficit in the third quarter to a surplus of 20,000 barrels per day in the fourth, and gives two reasons: prices of almost USD 200 per barrel “have curbed demand”, and US refiners have kept runs “unseasonably strong”. The build, it adds, will be “insufficient to offset the stock deficits accumulated” since the start of the war.

Winter will test that balance. German deliveries of non-road gasoil, which includes heating oil, were 44% lower than a year earlier in September, according to preliminary IEA data, and household tanks have been only about half full since May. The agency expects those purchases to return as temperatures fall, competing with road transport for the same middle distillates.

France’s derogation allowing summer-grade diesel ends on 15 November and Switzerland’s stock drawdown on 22 November.

Beyond the winter, the IEA sees a gasoil surplus of 460,000 barrels per day in the first quarter of 2027, almost 200,000 more than it forecast a month ago, and a small deficit again in the second. Both are close to normal seasonal patterns, hence its conclusion: “a let-up of market tensions will at best come in 2H27”.

It lists three things that could delay even that: strikes on Russian refineries, US distillate stocks at a 23-year low, and the risk that China restricts diesel exports again.

Crude is another story. The IEA expects supply to exceed demand from this quarter, and the US Energy Information Administration sees Brent averaging USD 86 per barrel in 2027.

For transport operators, the month brought some relief on prices but little improvement in supply. A return to pre-war diesel prices remains unlikely before the second half of 2027. Of the two levers that could move supply this winter, one has been pulled: emergency diesel is reaching the market, and France shows both its effect, 21 cents off the pump price in twelve days, and its limit, as stations in the east ran short when sales jumped. The other lever, the return of Middle East product exports, depends on talks with Iran that were thrown into doubt on 12 November.

Government relief, meanwhile, hangs on short deadlines. In the week of 9 November, Croatia raised its diesel duty by 2 cents per litre and Montenegro narrowed its excise cut from 25% to 10%.

The cuts in Austria, Czechia, Cyprus and Sweden run only to 30 November.

Spain’s 20-cent cut carries over into December, but its decree, like the measures in Germany and Poland, ends on 31 December.

Securing diesel supply and preserving cash flow remain two separate problems, and a lower price solves neither.

Brent crude futures rose through the second half of October and peaked at USD 117 per barrel on 30 October, as the December contract expired. They then lost ground before recovering to USD 96 on 12 November, about 31% above their level of 27 February.

The physical market fell further. North Sea Dated, the price paid for actual cargoes, averaged USD 125 per barrel in October, peaked at USD 136 on 8 October and stood at about USD 93 on 11 November, a fall of 32%.

Middle East crude exports rose to 15 million barrels per day in October, 82% of their pre-war level, according to the International Energy Agency (IEA). Saudi Arabia produced 10 million barrels per day, 1.1 million more than in September, and Iraq 4.6 million, its highest since 2019. For the first time since the war began, the world produced more oil than it consumed.

Prices followed this time, because the cost of moving crude across the Atlantic collapsed. The cost of shipping crude oil to Europe from the US Gulf Coast or West Africa fell from about USD 25 a barrel in early October to USD 8 on 11 November, according to the International Energy Agency. That reopened both routes just as more Saudi and Iraqi crude reached the Mediterranean through Egypt and Türkiye.

Brent for delivery in twelve months reached USD 89 per barrel on 30 October, its highest since 2022, and was back at USD 79 on 11 November, USD 14 below the front month. Oil for immediate delivery still costs more than oil for later delivery, a structure called backwardation and a sign of a market facing immediate supply shortages, but the gap is narrowing.

Crude is back. Diesel is not. “We don’t use crude oil, we use products,” the IEA said on 20 October.

Refined product exports from the Middle East reached 2.6 million barrels per day in October, the highest since the war began but still 44% below their February level, according to the IEA. The gain came from ports outside the Strait of Hormuz: product flows through the strait itself fell to about 700,000 barrels per day, against 3.1 million a year earlier. Net diesel exports from the Middle East were 560,000 barrels per day, 760,000 fewer than a year earlier. Refineries are part of the problem as well as ships: the attack of 27 October on Saudi Arabia’s Ras Tanura refinery brought total offline or idled capacity in the region to about 1.5 million barrels per day.

Russia, the second missing supplier, delivered more than it promised in October. After Russia eased its export ban on 10 October, gasoil exports doubled to 270,000 barrels per day, according to the IEA. Loadings reached 1.13 million tonnes against the 300,000 tonnes committed, including 240,000 tonnes for Türkiye and 160,000 for Brazil. But the respite was brief: six Russian refineries were hit in the week of 2 November, and Russia has prolonged the ban to 31 January 2027.

Other suppliers are stretched. US refiners postponed maintenance and processed 1.1 million barrels per day more crude than a year earlier in October, yet US diesel exports fell to an eight-month low of 1.3 million barrels per day, from 1.8 million in the summer. The country’s distillate stocks also dropped below 100 million barrels at the end of October, for the first time since 2003, before recovering to 103 million a week later.

China’s net exports of gasoline, diesel and jet fuel fell from 900,000 barrels per day in September to 400,000 in October. It issued new export quotas for 5.7 million tonnes on 28 October, but the IEA expects little extra diesel while China’s own market stays tight.

Europe has adjusted by importing less. OECD Europe imported 794,000 barrels per day of gasoil and diesel in August, a fifth less than a year earlier: deliveries from Saudi Arabia fell from 192,000 barrels per day to 20,000 and those from Eurasia from 253,000 to 89,000, while the Americas supplied 384,000, almost half the total. By October, the region’s net diesel imports had more than halved year on year, to 520,000 barrels per day, as refiners in Belgium, Greece, Italy and the Netherlands exported more. The other half of the adjustment is demand. Road diesel deliveries in OECD Europe were 4% lower than a year earlier in September, and about 7% lower in Italy and Spain.

European refiners are at least being paid to run. The diesel crack, the gap between the price of diesel and of crude, recovered from USD 57 per barrel in the first week of October to USD 84 in the first week of November. Diesel did not rise because of it, as North Sea crude collapsed. Wholesale diesel in north-west Europe averaged USD 198 per barrel in October and was close to USD 180 in mid-November.

Inland logistics remain the weak point. The Rhine gauge at Kaub recovered to about 60cm on 13 November, its highest in a month but little more than a third of its average for the date.

Switzerland opened its compulsory diesel stocks on 23 October, for up to 45,000 cubic metres until 22 November, but two-thirds had been drawn by 13 November, and its supply office still rates diesel supply as at risk.

In France, 19% of stations were reporting shortages in the Grand Est region, where the head of one retail group said on 11 November that depots were out of stock because the low Rhine prevented normal resupply. The IEA speaks of “pockets of tightness persisting in Europe as logistical disruptions compound an already constrained market”.

Stocks have stopped falling on paper but not on land. Observed global inventories rose by 52 million barrels in October, their first increase since June, but oil at sea rose by 86 million, so stocks on land fell again. They are 499 million barrels below their end-February level and at their lowest since at least 2016.

Emergency reserves are filling part of the gap. IEA members had released 349 million barrels by 6 November and plan a further 71 million by the end of February, about twice the pace of September and October. Diesel comes first: about 15 million barrels still to come, almost all from government stocks in France and Germany, at 4 to 5 million barrels a month through January. That is about 150,000 barrels per day, when global diesel output is running 1 million barrels per day below last year.

In the EU, twelve countries committed on 29 October to release 42.6 million barrels by the end of January, including 20.5 million barrels of diesel. France has sold strategic diesel to distributors at cost since 1 November and has ruled out a further release for now.

Two further costs still weigh before diesel reaches a European depot. Product tankers have not followed crude tankers down: shipping diesel from the Middle East to Japan, a benchmark for long-haul product freight, cost about twice as much in November as in August, according to the IEA. And the euro has weakened again, to about USD 1.11 on 11 November, its lowest since March 2025, so part of the fall in dollar prices does not reach European buyers.