European diesel prices are projected to ease from the highs of 2026 but remain well above historical norms due to a combination of disrupted trade flows, constrained inventory cover and a shift in refinery economics, Argus Media Consulting Services said in a note.
Northwest European diesel prices have averaged $153 a barrel in 2026, higher than the previous annual record of $143/bbl in 2022 after sanctions on Russian oil products. Prices averaged $159/bbl last quarter and are expected to gradually ease to $146/bbl this quarter and $141/bl next quarter, the note said.
"Escalating tensions in the Middle East have raised concerns over both crude and product supply, with repeated Houthi attacks on Saudi Arabia's Yanbu refining complex threatening operations at one of the region's most important export hubs," Argus Media's Sarah Raffoul said.
"Combined with the disruption of Aramco's east-west pipeline, the attacks have pushed crude prices sharply higher and increased uncertainty over diesel availability. Yanbu and Jizan refineries have become increasingly important outlets for moving diesel cargoes east and west of Suez as trade flows continue to adapt to disruptions through the strait of Hormuz," Raffoul added.
In the US, Europe's largest swing diesel supplier, export flexibility is diminishing as domestic demand recovers and refinery output faces seasonal pressure. Meanwhile, Brazil is also increasingly relying on the US and India for diesel as Russian supplies become less certain. This is expected to intensify competition for Atlantic Basin barrels and further limit diesel supplies available to Europe.
Record refining margins are encouraging refineries to run at high rates and delay maintenance, helping offset some lost Russian and Middle Eastern supplies. However, relief may be limited as European refineries face autumn maintenance, while inventories remain at historically low levels, the note said.
Europe is expected to enter winter with inventories below historical averages, leaving prices and refining margins vulnerable to further disruptions. Diesel prices are likely to fall from their 2026 highs but remain elevated, with Northwest European diesel forecast to average $123/bbl in 2027, the note added.
"While markets are likely to adapt through revised trade routes, demand destruction, shifting crude slates and higher refinery utilisation, low inventories and limited spare supply capacity are expected to keep diesel balances tight and prices above pre-war levels," the note added.
On Tuesday, European diesel prices recorded a new record high with cargoes loading from the Amsterdam-Rotterdam-Antwerp seen at $1,617.25/tonne, surpassing the $1,604/t hit on April 2, according to a separate note by the Argus pricing team.
"Trading reflects scepticism about Trump's claim on Monday that Russia and Ukraine mutually agreed to stop strikes on energy infrastructure. Ukraine's leaders have expressed doubts that Moscow would agree to a mutual halt in strikes," the note said.
Two major supply constraints remain, with about 1.3-1.4 million bbl/d, or 15-20%, of international shipments missing from the Middle East Gulf and Russia, it added.