Winter is coming for diesel, warns S&P Global Energy

The big squeeze continues to tighten for refined products, especially diesel, as stocks for diesel continue to push the lower boundary of historical ranges, according to a new S&P Global Energy analysis.

Global gasoline stocks began September at the lowest tracked levels for any month in at least the past 10 years. Refined product inventories, the buffer against disruptions, continue to erode.

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 says.

With fall harvests in the Northern Hemisphere approaching and the winter heating season in the US Northeast, Europe, and North Asia not far behind, global diesel exports averaged just 5.85 million barrels per day (b/d) in August 2026 – a 25% decline compared to August 2025.

In the United States, where diesel prices have hit all-time highs, inventories have fallen below 5-year seasonal lows despite record refinery runs.

“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.

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Inventories are low, spare refining capacity is scarce, and seasonal demand is about to strengthen at exactly the wrong moment,” said Karim Fawaz, Executive Director, S&P Global Energy.

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 6 million b/d compared to the previous year. S&P Global Energy now expects global refining runs in the fourth quarter of 2026 to be 79.4 million b/d, more than 2 million barrels/day lower than the previous outlook.

Supplies hit

In West Asia, S&P Global Energy no longer expects crude production and refining operations to return to pre-war levels before the end of 2027. Regional crude runs are expected to average about 7.7 million b/d in 2026, roughly 2 million b/d 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. Russia’s ban on diesel exports has already removed 10% of waterborne supply from the global market. 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 1 million b/d of diesel exports.

Meanwhile, the world's remaining unconstrained refining capacity is already running at close to maximum levels. Refinery utilisation in the United States has approached 97% this summer, while Europe and North America continue to operate at or near multi-decade highs in response to record margins. The industry is now approaching fall turnaround season with a significant incentive to keep pushing and little spare capacity left to offset unexpected disruptions.

According to Daniel Evans, Global Head of Fuels and Refining Research, S&P Global Energy, “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.”

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High diesel prices

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.

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.

"Policymakers may soon face uncomfortable trade-offs. 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," added Fawaz.

While global product markets continue to function, diesel remains the fuel most exposed to shortages. 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 says.