Global diesel fuel supply will remain tight into next year because there is not enough refining capacity elsewhere to compensate for outages at Middle Eastern and Russian facilities, Reuters has reported, citing refining and commodity trading industry executives.

"There's really a shortage of products because we're missing 2 million barrels a day from Russia, and we're missing nearly 2 million barrels a day from the Middle East," said Russell Hardy, chief executive of Vitol, speaking at the Asia-Pacific Petroleum Conference.

"When you're looking forward to a winter season coming where diesel stocks are quite deficit, you're setting up for an environment where that strength could continue in those markets," said Mark Senn, Phillips 66's senior vice president for global trading.

The timing is particularly fraught because diesel is the workhorse fuel of the global economy: it powers trucks, ships, and freight rail, and in many regions it is also a primary heating fuel, so demand typically rises in the colder months just as inventories are being drawn down.

Diesel prices in the United States have broken records recently, topping $5.90 per gallon this month. Diesel and other fuel prices are soaring around the world as the squeeze reaches end consumers, prompting governments to implement emergency relief measures such as fuel tax cuts. Because diesel feeds directly into the cost of transporting goods, sustained tightness tends to pass through to shipping and logistics costs, which has historically weighed on broader goods prices.

The problem is that the lost supply is not returning soon. As Vitol's Hardy explained, fuel exports out of the Middle East are running at just 1 million barrels daily, which has prompted inventory draws with no immediate prospect of replenishment.

"We keep eating into the surplus that exists around the world, and we're pretty much at the bottom of our stockpiles," the commodity major's CEO said, echoing remarks made by multiple industry executives and energy analysts over the past few months.

Russia has a ban on diesel exports while it repairs damage to refineries caused by Ukrainian drone strikes and contends with a fuel squeeze in its domestic market. Middle Eastern refiners, meanwhile, cannot get their fuels out of the Strait of Hormuz—and they are dealing with refinery damage as well. Attacks on infrastructure continue: Saudi Aramco's Jizan refinery, which has a capacity of 400,000 barrels daily, was attacked by Yemeni Houthis yet again this week.

By Irina Slav for Oilprice.com