Anabelle Colaco
16 Oct 2026

LONDON, UK: Record diesel prices are threatening to fuel inflation and weigh on economic growth as supply disruptions in the Middle East and Russia leave global markets facing continued shortages into next year, the International Energy Agency said.

The Middle East and Russia lost a combined 1.3 million barrels per day of diesel exports in September, equivalent to about 4.5 percent of the IEA's forecast for global diesel and gasoil demand this year.

Diesel is widely used in industry, agriculture and motoring, magnifying the economic impact of rising prices. The administration of U.S. President Donald Trump has told European Union countries to draw down inventories or face a potential U.S. diesel export ban.

"Record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation," the IEA said in its monthly report.

The agency said prolonged supply disruptions have forced inventories lower during a period when they would normally be increasing.

"As the remaining buffers in the system continue to erode, in the absence of a resolution to the conflicts in the Middle East, oil markets may experience more turmoil in the months ahead before any eventual surplus emerges in 2027," the IEA said.

A recovery in global refinery operations towards the end of this year is expected to begin replenishing stocks, but the IEA said that would not be sufficient to offset the deficit accumulated in middle distillates, a category that includes diesel, gasoil and jet fuel.

The global gasoil supply-demand balance is expected to remain tight during the first half of 2027 before easing in the second half. The IEA forecasts the gasoil market will remain in deficit during the third and fourth quarters of this year before returning to a surplus in the first quarter of 2027.

Diesel refining margins, the premium of the fuel over underlying crude oil, surged to record highs of almost $95 per barrel in September as reduced refining capacity hit production.

IEA members agreed in March to release 400 million barrels of oil from emergency reserves to counter shortages, later increasing total pledges to 426 million barrels. About 100 million barrels remain to be released.

The agency's governing board is due to meet Thursday to determine details of the move, with market participants watching the pace of releases and whether additional volumes will be agreed.

The pace of reserve releases slowed to around 270,000 barrels per day in September, down from an average of 2.2 million barrels per day between March and June. By the end of September, 331 million barrels had been released.

The IEA forecasts global oil supply will fall by 5.8 million barrels per day this year before rising by 7.7 million barrels per day in 2027, pushing the market back into surplus.

The agency also warned that recent attacks on Middle East energy infrastructure and tanker traffic could threaten further recovery, even as crude exports from Middle East producers rose by 4.4 million barrels per day in September to around 75 percent of pre-war levels.

"However, the recent escalation in attacks on regional energy infrastructure and tanker traffic is threatening to derail further gains," the IEA said.