IEA Warns European Diesel Prices May Rise as Global Supply Crunch Persists Into 2027

Market analysis

The International Energy Agency (IEA) warned on Wednesday that wholesale diesel prices in Europe could rise again in the coming weeks as global supply disruptions keep markets tight well into 2027. In its monthly report the Paris-based watchdog said that while Gulf crude exports have recovered somewhat, global production remains slightly below consumption and the diesel squeeze has not been resolved.

Global oil supply rose by 2.5 million barrels per day (mb/d) to 102.3 mb/d in September, driven by a Saudi-led jump in Gulf exports to more than three-quarters of pre-war levels. The IEA estimates, however, that world demand is around 103.5 mb/d, leaving a shortfall that keeps markets vulnerable.

The agency pointed to renewed attacks and shipping disruptions in the Strait of Hormuz and elsewhere in the Middle East as factors that keep the recovery fragile. Iran has choked the strategic waterway a route for about one-fifth of the worlds oil and stepped up attacks on ships, while Yemens Iranbacked Houthi rebels have targeted Saudi oil sites. UKMTO reported projectiles hit a tanker and a container ship in the strait, and Irans Revolutionary Guards said a container ship carrying more than 2,500 containers sank after hitting a naval mine, underscoring ongoing supply risks.

Brent crude, the international benchmark, rose about 1% on Wednesday and spiked above $107 per barrel in early trading before settling around $106. The U.S. benchmark West Texas Intermediate (WTI) traded roughly flat at about $94.75 per barrel.

Diesel crunch and policy response

Diesel benchmarks have eased from September records above $200 a barrel, but the IEA said they remain nearly double the price of crude and far above pre-crisis levels. Middle Eastern fuel exports are still under half their pre-war volumes and Russian refineries have been hit by Ukrainian drone strikes, leaving diesel and gasoil supplies under sustained pressure. Rising shipping and freight costs add further upward pressure on delivered diesel prices in major importing regions such as Europe, Africa and Latin America.

The IEA warned that lost diesel stocks are unlikely to be replenished beyond normal seasonal patterns before the second half of 2027, raising the prospect of renewed price spikes ahead of that window. On 2 October the G7 pledged up to 100 million barrels of emergency releases through the IEA, prioritising diesel. However, an internal IEA document seen by Euronews indicates much of that pledge would cover barrels still owed from the March release (part of a 400 million-barrel commitment), rather than representing a net addition to emergency supplies.

Demand outlook and differing forecasts

The IEA revised its demand outlook downward, forecasting that high prices and weaker economic growth will cut global oil demand by 2.6 mb/d this year to 102.4 mb/d slightly worse than its prior 2.5 mb/d estimate. It also trimmed its 2027 rebound to 2 mb/d from the 2.6 mb/d previously forecast, meaning 2027 demand would remain about 0.6% below 2025 levels.

OPEC, by contrast, has a more optimistic view. The oil exporters group lowered its 2026 demand growth forecast for the sixth consecutive month but raised its 2027 estimate to 2.55 mb/d from 2.36 mb/d, anticipating that stocks drained by the regional conflict will be rebuilt. OPEC reported crude output from OPEC+ which includes Russia rose by roughly 900,000 b/d to 39.07 mb/d in September. Seven core OPEC+ members left production targets unchanged for November on 4 October; many are still producing below quota due to the regional conflict.

The IEA cautioned that unless the regional conflicts are resolved, oil markets could face additional turmoil in the months ahead before any surplus emerges in 2027. Its board was due to meet on Thursday to discuss the evolving outlook and policy options.