IEA warns diesel stays tight into 2027 and speeds up release of emergency stocks

The International Energy Agency (IEA) warned on Wednesday 14 October that global diesel markets could stay tight well into 2027, Reuters reported. In its monthly Oil Market Report, the agency said: "Record diesel prices are already having broad economic consequences by raising the cost of goods and impacting real incomes, economic activity, and inflation."

According to Reuters, the IEA said combined losses of diesel exports from the Middle East and Russia totalled 1.3 million barrels per day in September, about 4.5% of the global diesel and gasoil demand it forecasts for this year. Diesel refining margins reached a record of almost US$95 per barrel in September. The IEA report showed the gasoil balance staying tight in the first half of 2027 and easing in the second half.

Cyprus Mail, summarising the same report on 15 October, said the IEA put global recorded oil inventories 509 million barrels below pre-war levels at the end of September, with onshore stocks at their lowest since at least 2016. It reported that wholesale diesel prices exceeded US$200 per barrel in Singapore during September and reached about US$220 in Europe and the United States, before easing. Exports of refined products from the Middle East were still below half of their pre-war levels.

A day later, on Thursday 15 October, the IEA Governing Board agreed to speed up the rest of its emergency stock release. Reuters reported that members "agreed to accelerate the release of the remaining volumes, with specific plans already in place, including over 20 million barrels of diesel as soon as possible." Xinhua reported that about 330 million barrels have been released so far under the March 2026 collective action, and that the board agreed to release the remaining 100 million barrels or so promptly, taking the total beyond the original 400 million barrels.

Reuters also cited a Bloomberg News report that the United States told fellow IEA members the current release plans do not go far enough to bring down fuel prices.

The IEA now expects world oil demand to fall by 2.6 million barrels per day in 2026, compared with a 2.5 million barrel decline it expected last month, with diesel making up 25% of that drop, Reuters reported. The agency forecasts supply to fall by 5.8 million barrels per day this year before rising by 7.7 million barrels per day in 2027. These are forecasts and depend on how the conflict develops.

Engine, a bunker market platform, reported that Gulf crude exports rose by 4.4 million barrels per day to 13.9 million barrels per day in September, over 75% of pre-war levels. The IEA added that "renewed attacks in the Gulf leave the recovery fragile." The IEA expects refinery throughput to rise from 81.3 million barrels per day in October to 84.6 million by December, Cyprus Mail reported, but said this will not make up for the stocks lost during the year.

Brent crude was at US$105.49 a barrel on 16 October, according to Trading Economics.

Reuters noted that diesel is used widely in industry, agriculture and motoring. For Sri Lankan traders it is the fuel behind most road haulage to and from the ports. The Ceylon Petroleum Corporation raised Lanka Auto Diesel by Rs. 10 to Rs. 392 a litre from 1 October, Daily FT reported, and Super Diesel by Rs. 50 to Rs. 528.

The IEA's view that diesel stays tight into 2027 suggests fuel costs for road haulage, and fuel-linked surcharges from shipping lines and airlines, may stay high for longer than many budgets assumed. The emergency stocks are released by the IEA's 32 member countries, so any effect on prices paid in Sri Lanka would come indirectly, through wider market prices.

For background, see our earlier posts on the October fuel price revision and private suppliers cutting diesel supply.

• Check how your transport contracts handle fuel. If haulage rates are fixed, ask your transporter whether a fuel adjustment clause applies and how it is calculated.
• When budgeting for the rest of 2026 and early 2027, allow for diesel-linked costs to stay high rather than assuming a quick fall.
• Ask your forwarder for the current bunker and emergency fuel surcharges on your main lanes, and how often they are revised.
• Combine part loads where possible to cut the number of truck trips between your site and Colombo.
• Keep an eye on the next CPC fuel price revision and on whether the IEA's diesel release changes prices in Asian markets.