India Runs Refineries Past Full Capacity as Global Diesel Market Tightens
Indian refiners plan to sustain above-100% utilization through March 2027 as war-driven supply losses eliminate the global buffer.
India's refineries have been running at between 105% and 108% of nameplate capacity for the past six months, a senior executive at Mangalore Refinery and Petrochemicals Limited told Reuters on the sidelines of the APPEC petroleum conference in Singapore on Wednesday (2026-09-09). The company, which operates a 300,000-barrel-per-day facility on Karnataka's coast, plans to hold output above 100% until at least March 2027.7
The disclosure comes as global refinery throughput is already stretched thin. The International Energy Agency reported in its August (2026-08-10) oil market report that global crude throughputs had reached 80.9 million barrels per day in July — nearly 5 million bpd below year-ago levels — and forecast average throughputs to decline by 2.5 million bpd across 2026 before recovering by 3.5 million bpd in 2027. Indian refiners are, in effect, compensating in part for gaps others cannot fill.3
Russia's collapse as a diesel supplier is the most acute driver of that gap. In the first seven days of August, Russian diesel and gasoil exports fell to just 80,000 bpd — against roughly 1 million bpd shipped in the prior year — after Moscow extended export restrictions as Ukrainian drone strikes continued to degrade refinery infrastructure, oilprice.com reported. Russia could theoretically add another 300,000 bpd, but with sustained attacks on its oil facilities, maintaining current output is already a challenge.3,2
Middle Eastern product exports have not filled the void. Goldman Sachs warned in late August (2026-08-31) that while Persian Gulf crude exports have recovered to an estimated 70% to 80% of pre-war volumes, product shipments remain at only 40% of pre-war levels. The bank more than doubled its forecasts for diesel refining margins, citing rising strikes on refineries in both conflict zones as the central driver.5
The IEA's own data underscore the arithmetic: even as US fuel exports rose by roughly 700,000 bpd in July compared with a year earlier, global seaborne trade in petroleum products fell by 3.8 million bpd, pulled down by plunging diesel and jet fuel flows from Russia and the Middle East. American shale producers cannot easily bridge that shortfall — ramping up output takes three to six months and is expected to yield only 300,000 to 700,000 bpd in the first instance.3,2
Against that supply backdrop, US retail diesel hit a nationwide average of $5.85 a gallon at the pump on Thursday (2026-09-03), a record high according to the American Automobile Association, with the AAA attributing the move to war-driven market disruption. NYMEX ULSD heating oil front-month was trading at $4.71 per gallon as of 2026-09-09, off 0.42% on the session, though some analysts flag bearish policy and supply-side signals that could cap further gains. ICE Brent crude front-month stood at $100.37 per barrel on 2026-09-09.6
India's ability to sustain above-capacity runs is not without limits. The country's electricity demand is growing at around 7% this year, with AI data centers expected to add 26.3 gigawatts of load by 2031, placing additional pressure on fuel supply chains that already support significant power generation. Coal supply disruptions are compounding the strain on India's grid, making diesel-fired backup generation a more frequent fallback.4
Elsewhere in Asia, South Korea — a major regional refiner that sources around 70% of its crude from the Middle East — is under its own pressure. President Lee Jae Myung declared an economic emergency in May (week of 2026-05-18) and the government passed an additional $17 billion budget in response. New Delhi, for its part, capped the pass-through of aviation fuel cost increases at 25% for domestic carriers even as underlying prices were tracking more than 100% higher.1
The forward picture hinges on whether Middle Eastern product export capacity recovers beyond the current 40%-of-pre-war level, and whether Russian refinery attacks ease enough for Moscow to rebuild export volumes. Neither looks likely in the near term. Goldman Sachs' warning on diesel margins, combined with India's stated plan to keep running flat out through March 2027 (2027-03-31), suggests the physical market will stay tighter than futures pricing alone implies. The next IEA monthly oil market report will be the clearest read on whether global throughputs are stabilizing or deteriorating further.5,3