In early September, the premium of European diesel prices relative to crude oil hit a record high, with the cracking margin for diesel delivered in Southern Europe briefly touching $104.08 per barrel.

The extension of Russia's diesel export ban, disruptions to supply caused by Middle East conflicts, and continued depletion of inventories have collectively driven diesel prices upward. With European refineries about to enter their maintenance season, supply pressure could intensify further.

Diesel Wholesale Prices Surpass Crude Oil by More Than Double

On September 1, the Southern European diesel cracking margin climbed to $104.08 per barrel, breaking through the $100 threshold for the first time, before easing to $100.79 the following day. Northern Europe saw corresponding margins of $99.66 and $96.53 per barrel over the same period. By September 2, Southern European diesel wholesale prices had reached $198.73 per barrel, while Northern Europe stood at $194.47.

Although these levels remain below the historical peak of $215 per barrel recorded on April 2, Southern European diesel prices have now surpassed double the price of the corresponding North Sea crude oil. The record highs for diesel premiums and absolute diesel prices occurred at different points in time, with this latest milestone reflecting supply constraints in the refined products segment rather than crude oil itself.

Export Cuts and Inventory Depletion Squeeze Supplies

Industry estimates indicate the international diesel market is currently short approximately 1.3 to 1.4 million barrels per day of supply, equivalent to 15% to 20% of normal international diesel trade volumes. This ratio applies specifically to international trade flows, not global diesel consumption as a whole. Russia's extension of its diesel export ban until September 30, limited export volumes from Asian refineries, and steadily declining US inventories have all contributed to pressures on the diesel market that exceed those felt in the crude oil market itself.

Alan Gelder, Senior Vice President of Refining at Wood Mackenzie, noted that global diesel supply has yet to meet demand, forcing the market to draw down on inventories. He suggested that, given economic activity can still withstand current price levels, diesel prices may need to rise further to curb demand down to levels that existing supply can satisfy.

September-October Maintenance Could Widen the Spread Further

Josh Michalowski, Head of European Diesel Pricing at Argus, said prices could retreat in the short term, but planned maintenance at European refineries during September and October could drive cracking margins even higher. Amrita Sen, Co-Founder of Energy Aspects, believes that insufficient refined product supplies from the Middle East and Russia are keeping market supply and demand tight, with the premium of refined products over crude oil pushing up end-user fuel prices and prompting demand adjustments. Current evidence supports the view that diesel supply will remain under pressure through autumn, though it is not yet sufficient to confirm that shortages will persist throughout the entire winter season.