Global Diesel Supply Falls 35% as War-Linked Refinery Outages Drive Crack Spreads to Records
Goldman Sachs has ranked diesel the biggest oil market threat, with Russian and Chinese processing cuts leaving global refining throughput 6.5 million barrels a day below year-ago levels.
Diesel crack spreads reached record levels on July 21 (2026-07-21), Bloomberg Surveillance reported. NYMEX ULSD front-month heating oil stood at $4.28 a gallon as of August 13 (2026-08-13). Goldman Sachs, in a note published July 30 (2026-07-30), called the diesel crunch the biggest threat in oil markets, describing global refining activity at this time of year as the lowest since the 2020 pandemic.7,8
The numbers behind that assessment are stark. Goldman estimated global refining throughput had slumped 6.5 million barrels a day below July 2025 levels, as war-induced outages in the Middle East and Russia were compounded by China's decision to cut runs. Diesel exports globally dropped roughly 35%, or 2.6 million barrels a day, Goldman calculated.8
Russian processing has taken the heaviest individual hit. Ukrainian strikes on refining infrastructure drove crude runs to an average of 3.91 million barrels a day in July, according to EA Analytics data — the lowest level since March 2005 and more than 1.4 million barrels a day below the year-ago average.5
The IEA put Russian plant throughput at 3.8 million barrels a day in June (2026-06), down 1.6 million barrels a day from a year earlier. Runs fell further into July. No reversal is visible while the attacks continue.5
China contributed from a different direction. A near-halt to crude shipments through the Strait of Hormuz choked imports and pushed state-owned refinery runs to multiyear lows by May (2026-05), Bloomberg reported. The state sector bore the sharpest cuts.2
European inventories have absorbed the combined shortfall. Morgan Stanley, in a note dated July 20 (2026-07-20), said multiple supply disruptions had dragged European diesel stocks toward multi-year lows. "The picture is genuinely tight," the bank wrote. Refining margins across the region surged.6
US refiners have been on the other side of that trade. Rigzone reported in early July (2026-07-03) that American processors were posting some of their best margins in years, capitalizing on the crude-to-products spread that is punishing importers in Europe and Asia.4
The crude flows reflect the same dynamic. US crude exports reached a record 5.6 million barrels a day in May (2026-05), eclipsing the previous April (2026-04) record of 5.2 million bpd, with Asia absorbing 2.45 million bpd to retain its position as the top buyer for a second consecutive month, Kpler data cited by Reuters showed. Vortexa's Rohit Rathod said Asian purchases were driven mainly by necessity while European buying reflected favorable transatlantic freight rates.3
That pace is cooling. Georgios Sakellariou, chartering analyst at Signal Maritime, said the firm expected US crude exports to fall by over 1 million bpd in June (2026-06) compared with May, having observed at least 10 fewer Very Large Crude Carrier bookings for June dates. Low US crude inventories could redirect more barrels into domestic storage, limiting what overseas buyers receive.3
Not all market participants are positioned for further tightening. Bearish signals have emerged on NYMEX ULSD front-month, reflecting concern among some traders that demand destruction at current pump prices poses a risk the supply-shock narrative does not fully price.
Sander Cohen at energy consultancy ESAI Inc. said higher prices were a likely consequence as more buyers competed for US fuel supply. Europe's exposure to that dynamic is considerable: EIA data show the region took 48.4% of all US distillate exports in October 2025, up from 43.5% a year prior.1
Russian recovery timelines and any resumption of Chinese crude imports through the Strait of Hormuz are the two variables that could shift the balance before European winter demand begins to build. Russian processing rates, still at their lowest in more than two decades, are where supply-side traders are most closely focused.5