Global diesel markets face prolonged shortage into 2027

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Global diesel shortage into 2027

Highlights

Diesel storage capacity available for lease in North America and the Caribbean rose to 13 million barrels in October, reflecting expectations of extended supply tightness through Q1 2025.
U.S. diesel inventories dropped to 107.9 million barrels by September 11, the lowest September level since 1982, with the EIA forecasting sub-100 million barrels through most of 2027.
Retail diesel prices in the United States surpassed $6 per gallon for the first time this month, intensifying cost pressures on fuel-dependent industries and global trade.

Storage signals point to extended supply tightness

As reported by Reuters, traders and refiners in North America are increasingly declining to renew diesel storage leases because there is little fuel available to put into tanks, a market signal that the shortage is unlikely to ease before next year.

Data from storage broker The Tank Tiger show diesel storage capacity available for leasing in North America and the Caribbean rose to 13 million barrels for October, up from 11 million barrels in June. Chief Operating Officer Steven Barsamian says the combination of lower inventories and more tanks being offered for lease suggests market participants expect supplies to remain tight into at least the first quarter of next year, with storage contracts typically running six months to a year.

U.S. diesel inventories fell to 107.9 million barrels by September 11, the lowest for this time of year since records began in 1982, according to the U.S. Energy Information Administration. The agency said earlier this month it expects distillate fuel oil inventories in the United States to drop below 100 million barrels in September and stay below the five-year low through the end of 2026 and most of 2027.

High fuel costs weigh on businesses and global trade

Retail diesel prices in the United States topped $6 a gallon this month for the first time, increasing pressure on farmers, truckers and other fuel-intensive businesses. EcoBox Dumpsters says it is using smaller trucks where possible, combining deliveries and pickups in the same area, and confirming schedules to avoid unnecessary trips as costs rise.

Low stock levels are also visible outside the U.S. In Europe, diesel inventories in the Amsterdam-Rotterdam-Antwerp hub were 16% below the five-year average in July, according to Insights Global, while Singapore distillate inventories in recent weeks remain below the 2025 average even if they are near pre-Iran war levels.

Industry executives expect the market to stay tight through winter, especially if Middle East tensions further disrupt fuel exports and Russia's diesel export ban remains in place through October. Andrea Pescatori of the International Monetary Fund says several Asian emerging markets have already been affected significantly, underscoring the broader economic risk from persistently high diesel prices.

In our earlier article, we covered how U.S. companies were being squeezed by a combination of tariffs, elevated fuel prices and higher interest rates, which has been eroding margins and complicating pricing and investment decisions. We noted that smaller firms are typically hit harder because they have less flexibility to finance inventory and absorb input inflation, prompting some businesses to adjust operations and even shift business models to manage the cumulative cost shock.

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