The International Energy Agency (IEA) has agreed to release more than 20 million barrels of diesel into global markets as soon as possible, as part of a larger emergency effort to curb record-high fuel prices. This move is tied to a massive coordinated action initiated in March 2026, in which member nations pledged to withdraw more than 400 million barrels of crude oil and petroleum products from strategic reserves in response to the crisis in the Strait of Hormuz.
According to the IEA, approximately 330 million barrels have already been withdrawn from emergency stocks. While some member states have exceeded their March pledges, the United States has informed other members that current withdrawal plans are insufficient to contain rising fuel costs. This pressure comes as U.S. President Donald Trump urged European Union countries to release their reserves, suggesting the possibility of a U.S. ban on diesel exports if they fail to do so, ahead of the November 3 midterm elections.
Supply Disruptions Push Diesel Prices to Record Levels
The surge in prices is driven by severe supply disruptions caused by conflicts in the Middle East and the war between Russia and Ukraine. In mid-September, wholesale diesel prices surpassed $200 per barrel in Singapore and reached record levels of nearly $220 per barrel in the U.S. and Europe. In the United States, the retail price for a gallon of diesel hit $6 for the first time last month.
These shortages have pushed diesel refining margins to historic peaks of nearly $95 per barrel in September. The IEA noted that diesel and gas oil exports from Russia and the Middle East combined for a loss of 1.3 million barrels per day in September, representing roughly 4.5% of the agency’s projected global demand for the year.
Trump Agrees with Putin to Supply Diesel
To mitigate the crisis, President Trump announced an agreement on October 9 with Russian President Vladimir Putin to supply diesel to U.S. and global markets. The deal includes an immediate delivery of over 300,000 metric tons, followed by 500,000 tons in November and an additional one million tons thereafter, depending on the status of Russian refineries. However, the IEA characterized the overall economic impact of this deal as limited.
Other member nations are also contributing to the reserve draws. Spain announced plans to withdraw 4.4 million barrels from its strategic reserves during October, having already released 3.7 million of the 11.5 million barrels it pledged in March.
Diesel Shortage May Persist Until 2027
The IEA warns that the global diesel shortage may persist until the second half of 2027. While global refining activities are expected to recover by the end of this year—increasing from 81.3 million barrels per day in October to 84.6 million—this will not be enough to offset the accumulated deficit in middle distillates, which include jet fuel, gas oil, and diesel.
The agency highlighted several critical risks to the global economy:
- Inflation: High fuel prices are increasing the cost of goods and pressuring real incomes.
- Economic Growth: Continued shortages may limit the ability of companies to absorb costs, passing them to consumers and harming growth.
- Reserve Depletion: The ongoing drain on strategic stocks weakens the market’s ability to withstand future shocks.
Current projections suggest global oil demand will drop by 2.6 million barrels per day in 2026, with 25% of that decline stemming from reduced diesel consumption in heavy transport and industry. A return to market surplus is not anticipated until 2027, when supply is expected to rise by 7.7 million barrels per day.
This current instability follows a period where global inventories plummeted by 509 million barrels compared to previous levels, with sharp declines recorded in China and OECD nations.
