BAKU, Azerbaijan, June 13. Long-term diesel price movements will hinge on supply-demand dynamics in emerging markets, Trend reports via BMI, a Fitch Solutions company.
The addition of refining capacities in China, the Middle East, Africa, and other Asian markets is expected to bolster supply-side fundamentals. In particular, China's diesel supply growth will be significant as many new greenfield refineries scheduled to come online between 2024 and 2030 are geared towards maximizing middle distillate production, with some also focusing on chemicals production.
India's diesel surplus is forecasted to expand further upon completion of refining capacity additions. As diesel demand growth slows in Europe and the US, India could potentially redirect its diesel exports to Asia, thereby intensifying price pressures in the region.
Competition for market share among major diesel exporters such as South Korea, China, India, the US, and Middle Eastern refiners could hinder a robust
recovery in diesel prices in the long term. Despite faltering demand growth in the US and Europe, incremental growth in China, India, and other emerging markets may offset some of these declines. However, BMI cautions that supply growth could outpace demand, particularly as natural gas and renewables gain traction in the power and industrial sectors, and electricity becomes a viable alternative in the transport sector.
BMI forecasts global diesel prices to weaken, averaging USD 102 per barrel from 2024 to 2028, reflecting these supply-demand dynamics.
In the US, sustained weakness in diesel consumption is expected to constrain any significant price recovery unless refiners reduce diesel production to alleviate downward pressure from oversupply. Despite sluggish domestic demand and high inventory levels, US diesel production has begun to rebound since March 2024. Unless production cuts occur, BMI anticipates that elevated inventories will continue to weigh on prices and refining profitability.
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