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Global Diesel Supply Tightens as Dual Disruptions Remove 8% From Market

Simultaneous supply disruptions in Russia and the Middle East have eliminated roughly 8% of worldwide diesel fuel availability, removing approximately 2 million barrels per day from global markets, according to Andy Lipow, president of Lipow Oil Associates. Russian refining capacity has been significantly impaired. Between 30% and 50% of the nation's 6.5 million barrel-per-day capacity is either offline or operating at reduced levels. Prior to recent conflict, Russia exported 800,000 barrels daily. Ukrainian drone strikes have damaged Russian refining infrastructure, with one weekend attack involving 1,900 drones. In the Middle East, Saudi Arabia's East-West Pipeline remains shuttered following Houthi strikes. The pipeline typically moved 2.8 million barrels daily to Red Sea refineries and European markets. It supplied 650,000 to 800,000 barrels of diesel daily to European customers. The Jizan refinery, a 400,000-barrel-per-day Saudi facility, was also struck at the end of July. It produces over 200,000 barrels of diesel daily. Industry observers warn repairs could extend months or years given international sanctions. Lipow noted that equipment repairs will be particularly difficult for Russia. Carriers and shippers face mounting fuel costs. California diesel prices were approaching $8.50 per gallon.