Low Global Diesel Supplies Propel Crude Prices Higher: What This Means for Your Business and Investments in Oman
NEW YORK — Low global diesel inventories are counteracting the downward pressure on crude oil prices caused by increased OPEC+ supply, setting the stage for a third consecutive year of above-average refining profits.
Diesel, which constitutes the largest share of global fuel demand, has remained a rare bright spot in an otherwise subdued oil market this year. Analysts attribute this to refinery shutdowns and a scarcity of crude oil grades that yield higher diesel output, keeping diesel stockpiles below historical averages.
Demand for diesel, used extensively in industry and transportation, has remained unexpectedly robust due to resilient manufacturing activity and reduced impact from heatwaves in certain regions.
The tight diesel supply has bolstered global oil prices, enabling the Organization of the Petroleum Exporting Countries and allied producers to roll back their most significant supply cuts months ahead of schedule. This market dynamic may also support further production increases under current consideration.
Global benchmark Brent crude futures have climbed 15% to approximately $68 per barrel from their May lows, when OPEC+ began easing output restrictions.
“Tight diesel inventories are providing a very strong floor to oil markets in the mid-$60 per barrel range in the short term,” said Natasha Kaneva, head of global commodities strategy at J.P. Morgan.
U.S. distillate fuel inventories stood at 113 million barrels as of August 1, 12% below the five-year average, according to government figures. Meanwhile, diesel stocks at Europe’s Amsterdam-Rotterdam-Antwerp trading hub fell below 13 million barrels for the first time since December 2023.
This supply tightness has surprised many, as early in the year analysts and fuel producers expected a surplus following the commissioning of new refineries worldwide.
However, recent quarterly reports from leading global refiners have shown stronger-than-anticipated profits, driven by high refining margins.
“If I were a trader, I would be very comfortable going long diesel in the months ahead,” said Tom Kloza, analyst at consultancy Turner, Mason & Co.
The reduced diesel inventories have pushed refining margins higher in recent months. In the U.S., ultra-low sulfur diesel (ULSD) futures briefly traded at a $40 premium over crude futures. — Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The persistent tightness in global diesel inventories underpins a strong price floor for oil, presenting both a risk by keeping fuel costs elevated and an opportunity for Oman’s refining sector to capitalize on sustained high refining margins. Businesses involved in fuel supply chains and industrial transport should prepare for continued robust demand and potential price volatility, while investors could strategically focus on refinery and logistics assets benefiting from this resilient market dynamic.
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