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Fuel Frenzy: Brace for Winter as Diesel Supplies Run Dry


Global Diesel Market Faces Supply Concerns as Winter Approaches

The global diesel market is currently facing high prices and concerns over supply as winter approaches. This situation would typically cause panic among countries, as it indicates a scarcity of fuel that could lead to inflation. However, the market looked even worse at this time last year following Russia’s invasion of Ukraine, and prices eventually came down due to a mild winter. Nevertheless, the current low stockpiles mean that any unexpected market surprises could have a significant impact. Supply curbs or demand shocks from cold weather or strong economies could further exacerbate the situation.

Eugene Lindell, head of refined products at industry consultant FGE, has expressed concern over the lack of stock building before October. He states that stocks usually begin drawing seasonally from September, but there is a worry that they will not build sufficiently this year. The diesel supply concerns are particularly focused on Europe and the US Atlantic Coast.

Refinery curbs and soaring fuel margins have been affecting global supplies in recent weeks. Stockpiles of diesel-type fuel in northwest Europe are expected to fall in the coming months, although this is typical for this time of year. Inventories are currently lower than historical norms, despite being higher than the previous year. The outlook for Europe’s diesel/gasoil supply is tight due to lower yields from lighter crude slates, a shift to jet yields, and unplanned refinery outages, according to Emma Howsham, a research analyst for refining and oil product markets at Wood Mackenzie. Demand is expected to increase month-on-month until November. The switch to less dense crude, influenced by cuts from Saudi Arabia, Russia, and others, has resulted in OECD Europe’s yields of diesel-type fuel being more than 1.6% lower in July compared to the historic average.

China’s role in the diesel market is also being closely watched. The government is set to release fresh fuel export quotas, which could potentially ease the current tightness if Chinese refiners are able to keep shipping fuels. However, there is a possibility that this may offer only limited relief.

The performance of the diesel market is not only important to traders but also has broader implications. Diesel is the largest segment of petroleum product demand and is used in various industries, including transportation, heating, and heavy machinery. Hedge funds are increasing their bullish bets on Nymex diesel, with net-long positions reaching an 18-month high in August. Major shortages and price shocks in the diesel market can have significant implications for governments and industries. In the past, high diesel prices have led to trucker strikes in Asia and have put pressure on governments trying to combat rising energy costs. The rising costs also impact farmers and trucking companies in the US who purchase diesel in bulk.

The current supply crunch highlights the dilemma faced by nations as they try to transition away from fossil fuels. Recent heatwaves have affected refinery output and disrupted a global system that is still adjusting to the closure of several plants in recent years.

Thomas Lyons
Thomas Lyons
Thomas, the founder and chief editor at Top Rated, harbours a deep-seated passion for business, news, and product reviews. His thirst for knowledge and experience has led him on a journey across the length and breadth of the country, enabling him to garner a wealth of insight. At TopRated.ie, his sole aim is to deliver meticulously researched news and provide impartial reviews of fact checked Irish companies, thus helping readers make well-informed decisions.


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