A new analysis by the S&P Global Energy Fuels and Refining team, which was sent to Rigzone recently, warned that “winter is coming for diesel”.
The analysis noted that “the big squeeze continues to tighten for refined products – especially diesel”, warning that refined product inventories, which it described as “the buffer against disruptions”, continue to erode.
According to the S&P team’s analysis, global gasoline stocks began September at the lowest tracked levels for any month in at least the past 10 years, but stocks for diesel continue to push the lower boundary of historical ranges.
“While the end of the summer driving season offers at least something of a respite for gasoline demand, the most challenging time of year for the global diesel market is just beginning,” the analysis warned.
The analysis pointed out that, “with fall harvests in the Northern Hemisphere approaching and the winter heating season in the U.S. Northeast, Europe, and North Asia not far behind”, global diesel exports “averaged just 5.85 million barrels per day in August 2026”. This was a 25 percent decline compared to August 2025, the analysis highlighted.
Looking at the U.S., the analysis noted that diesel prices have hit all-time highs and said inventories had fallen below five-year seasonal lows despite record refinery runs.
“S&P Global Energy now expects global diesel crack spreads to average about $84 per barrel through the remainder of 2026, a $31 per barrel increase from previous expectations,” the analysis revealed.
Karim Fawaz, Executive Director at S&P Global Energy, said in the analysis, “winter is coming for diesel markets”.
“The industry has spent six months managing a record disruption, but the next challenge is adapting to a world where supply remains constrained for longer than expected,” Fawaz added.
“Inventories are low, spare refining capacity is scarce, and seasonal demand is about to strengthen at exactly the wrong moment,” Fawaz continued.
The Big Squeeze
The S&P analysis warned that, “overall, the conditions that have put the big squeeze on refined products have continued to degrade, with global refinery runs and capacity expected to remain significantly below pre-crisis levels for much longer than previously anticipated”.
Global refinery runs in August were down more than six million barrels per day compared to the previous year, according to the analysis, which warned that S&P Global Energy now expects global refining runs in the fourth quarter of 2026 to be 79.4 million barrels per day, which it pointed out is more than two million barrels per day lower than its previous outlook.
Looking at the Middle East, the analysis outlined that S&P Global Energy no longer expects crude production and refining operations to return to prewar levels before the end of 2027. Regional crude runs are expected to average about 7.7 million barrels per day in 2026, according to the analysis, which highlighted that this is roughly two million barrels per day below 2025 levels “as a large share of capacity remains either physically impaired, logistically stranded, or operationally unable to restart with confidence”.
Russian refinery runs remain near July 2026 lows and are likely to recover only gradually from September onward, the analysis stated.
“Russia’s ban on diesel exports has already removed 10 percent of waterborne supply from the global market,” it added.
“Further decline in Russian refinery runs could amplify the risk to global diesel markets by possibly leading Russia to import fuel to backfill domestic needs, compounding the outright loss of the near one million barrels per day of diesel exports,” it warned.
Meanwhile, the S&P analysis outlined that the world’s remaining unconstrained refining capacity is already running at close to maximum levels.
“Refinery utilization in the United States has approached 97 percent this summer, while Europe and North America continue to operate at or near multi-decade highs in response to record margins,” it said.
“The industry is now approaching fall turnaround season with a significant incentive to keep pushing and little spare capacity left to offset unexpected disruptions,” it added.
Daniel Evans, Global Head of Fuels and Refining Research at S&P Global Energy, said in the analysis that the market “has survived the first phase of the crisis because inventories, trade flows, and refinery flexibility absorbed much of the shock”.
“Those shock absorbers are not disappearing, but they are becoming progressively weaker. Markets are entering winter with less room for error than they had in the spring,” he added.
The Challenge
S&P’s analysis warned that, for governments and policymakers, “the challenge may increasingly become one of balancing energy affordability, inflation, and security of supply”.
“High diesel prices directly affect freight, agriculture, construction, manufacturing, and home heating costs,” it highlighted.
“While markets have so far avoided an outright availability crisis, a prolonged period of low inventories, very high prices, and limited spare capacity raises the risk of interventions designed to protect domestic supplies, ease fuel price and inflation pressures, or manage demand,” it added.
“While global product markets continue to function, diesel remains the fuel most exposed to shortages,” it continued.
“With harvest demand ramping up, winter heating demand approaching, inventories already depleted and supply recovery pushed further into the future, the market’s margin for error is rapidly shrinking, and the slightest supply disturbance may move the market from acute tightness to outright distress,” the analysis warned.
Fawaz went on to note in the analysis that “policymakers may soon face uncomfortable tradeoffs”.
“Protecting consumers from higher fuel costs, preserving energy security and maintaining open trade flows becomes increasingly difficult when the world is short available refining capacity. The longer this disruption lasts, the harder those choices become,” he said.
Refined Products Remain Epicenter of Energy Squeeze
While crude is tight, refined products remain the epicenter of the energy squeeze, Ole Hansen, Saxo Bank Head of Commodity Research, said in a statement posted on Saxo Bank’s website on Wednesday.
“Diesel prices in both Europe and the U.S. have surged to a record above $220 per barrel, with European gasoil and New York ULSD recently trading around twice the price of Brent crude,” Hansen highlighted.
Hansen also noted in the statement that this year’s “extraordinary backwardation has further amplified investor returns”.
“The Bloomberg Commodity Index total-return components show European gasoil up around 232 percent year-to-date and NY ULSD around 203 percent, compared with roughly 117 percent for Brent,” he pointed out.
Hansen went on to warn that the economic implications extend well beyond energy markets.
“Diesel is a critical input for road freight, agriculture, construction, mining, and manufacturing, meaning sustained high prices eventually feed into transportation costs and consumer prices,” he said.
“U.S. retail diesel reached a record $6.27 per gallon this week, while distillate inventories remain well below normal seasonal levels,” he added.
In a BMI report sent to Rigzone by the Fitch Group on Friday, analysts at BMI highlighted that Brent crude had faced “continued upward pressure” that week, adding that the physical market was signaling “acute tightness”.
They warned, however, that pressures were “more acute downstream, with diesel cracks breaking record highs in both Europe and the U.S. and U.S. diesel prices rising above $200 per barrel on September 9, raising the specter of fuel shortages next quarter”.
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