Diesel prices remain elevated because crude oil flows have recovered far faster than the refining and export infrastructure needed to convert that crude into usable fuel, according to an October 2026 analysis published by EBC. Gulf crude shipments excluding Iran returned to near pre-conflict levels by September, yet Gulf diesel and gasoil exports in August stood at just over one-quarter of normal volumes. China's decision to suspend most fuel exports in October has now removed a key source of replacement supply, leaving import-dependent markets competing for fewer available cargoes even as the crude market appears healthy.
The report details a stark divergence between upstream and downstream recovery. Kpler data show that at least 16.5 million barrels per day of non-Iranian Gulf crude left the region between September 1 and 28, matching pre-conflict averages. Before the disruption, 83% of Gulf crude crossed the Strait of Hormuz, but by September only 40% did, as pipeline routes, alternative terminals and ship-to-ship transfers carried more of the flow. Meanwhile, the International Energy Agency estimated Gulf diesel and gasoil net exports at only 390,000 barrels per day in August, down from pre-conflict norms. Combined Gulf and Russian diesel exports were 1.6 million barrels per day below February levels. Global refinery throughput reached 81.4 million barrels per day in August, still 4.2 million barrels per day below the prior year, with the largest losses concentrated in the Middle East, Russia and parts of Asia.
China's October suspension followed a surge in September, when the country loaded roughly 1.4 million tonnes of diesel before major refiners entered October without approval to continue most fuel exports beyond Hong Kong and Macau. Domestic crude processing at large industrial enterprises fell 6.9% year over year to 59.07 million tonnes in August, while January-August processing declined 6.6%. The report notes that Kpler estimates place commercial diesel and gasoil inventories roughly 20 million barrels below the threshold Beijing has used for freer exports, pointing to inventory rebuilding and supply security as major drivers of the pullback. China's September fuel destinations included Singapore, Malaysia, Australia, Vietnam, Bangladesh and the Philippines, all of which now face a narrower pool of readily available replacement cargoes.
The analysis explains that crude rerouting can adapt quickly when shipping patterns break down, but refining capacity has no equivalent shortcut. Restoring diesel supply depends on bringing disrupted facilities back online or finding spare capacity elsewhere, and neither has happened fast enough. Atlantic Basin refining margins reached record levels, led by diesel, yet output has not recovered enough to close the gap because outages, limited spare capacity and existing supply commitments are constraining the response. The report emphasizes that diesel can remain expensive even if crude prices soften, because the remaining constraint is the ability to turn available crude into diesel that can actually reach the markets that need it. Bangladesh faces higher import costs and external pressure, with fuel and lubricant inflation reaching 13.8% in the April-June quarter. Australia is treating diesel as a fuel-security risk, proposing a 1 billion-litre strategic reserve even though current supply is described as secure. In the Philippines, diesel inflation in Cagayan Valley accelerated from 43.7% in July to 57.8% in August, identified as the main driver of transport price increases.
The report concludes that stronger crude flows can overstate how much the physical fuel market has actually healed. As long as exportable diesel supply remains constrained, higher crude availability alone can't close the gap. The bottleneck has shifted downstream, and high diesel margins aren't enough to fix the shortage because refiners are already being paid to produce more but can't deliver additional barrels fast enough. China's withdrawal narrows the pool of readily available cargoes just as import-dependent economies compete for the same limited supply, and the imbalance between crude recovery and finished-fuel availability is likely to keep diesel expensive until refining capacity and product inventories catch up.