The diesel market is expected to remain tight into 2027 amid supply disruptions in the Gulf stemming from the U.S. war against Iran, the International Energy Agency (IEA) said Wednesday, as it would take time to rebuild depleted stocks.
"The gasoil market balance will remain tight well into 2027 and is dependent on a recovery of product supply from the Middle East," the Paris-based agency said in its monthly energy markets report.
Diesel prices have hit record highs across Europe and in the U.S. in recent weeks, due to both reduced oil exports from the Gulf and damage to refineries in the region from retaliatory attacks by Iran.
Governments have responded by reducing fuel taxes or providing subsidies, and by releasing strategic reserves that will need to be rebuilt.
The IEA predicted that refining capacity will recover and lead to a surplus on the diesel market in the first quarter of next year, "lifting stocks broadly in line with normal seasonal patterns."
But that will not fully compensate for the deficit accumulated since the U.S. and Israel launched strikes against Iran in late February, which sent energy prices soaring around the globe.
And if Gulf supplies do not return to normal levels soon, "further demand reductions and the heavy economic costs these will entail may be needed to balance markets," the IEA warned.