The Kobeissi Letter: Global Diesel Daily Shortfall Approximately 1.1 Million Barrels
Market communication The Kobeissi Letter summarizes data from ship cargo tracking companies, stating that from March to August, there has been a historic shortfall in global diesel supply: the Middle East is short by approximately 773,000 barrels per day, Russia by about 348,000 barrels, totaling around 1.1 million barrels.
By agency, Vortexa estimates a year-on-year decrease of 835,000 barrels/day in the Middle East and 377,000 barrels/day in Russia; Kpler estimates 750,000 and 361,000; Energy Aspects estimates 733,000 and 307,000. The average of the three is used to hedge against single model bias.
Since July 8, Russia has banned diesel exports to ensure domestic demand, with the ban extended until September 30. Kobeissi states that from July to August, Russian diesel supply decreased by another 615,000 barrels/day year-on-year. Kpler shows that shipments before the ban dropped from an average of about 817,000 barrels in 2025 to about 400,000 barrels in June, further falling to about 210,000 to 230,000 barrels in early July.
The background is that since late February, the Gulf conflict has restricted the export of refined oil through the Strait of Hormuz. Columbia University's Center on Global Energy Policy states that the Middle East accounts for over 15% of global diesel maritime exports, with regional refinery utilization dropping by about 27% in the second quarter. The IEA states that in July, global maritime refined oil trade decreased by 3.8 million barrels/day year-on-year, with more than half being diesel and jet fuel.
The European diesel crack spread surged to a record of about $60 per barrel after the announcement of the ban. In the U.S., GasBuddy tracked record retail diesel prices, with inventories falling below the five-year average. Buyers of Russian oil, such as Brazil and Turkey, have shifted to compete for U.S. products.
In market mechanisms, buyers are truck transport, agriculture, and power generation fuel merchants, while sellers are U.S. Gulf Coast and Asian export refineries that have not yet been cut off. The event drivers are the blockage of the strait combined with the export ban after attacks on Russian refineries, with inventory buffers already consumed in the first half of the year. Capital flows are directed to refineries and refined oil tankers that can still ship; U.S. exporters with remaining capacity benefit, while Europe and Asian importers reliant on Middle Eastern middle distillates are under pressure.
Source: Public information
ABAB AI Insight
The diesel shortfall is harder to address than the crude oil shortfall, as ships can reroute, pipelines can change paths, but secondary processing facilities cannot be relocated in a few months. The Strait of Hormuz is blocking middle distillates that have already been refined by Gulf refineries, while the Russian ban removes the second-largest export source that buyers outside Europe previously relied on. The simultaneous drop in both sources effectively dismantles the structure rebuilt after 2022 of "Russian oil to Europe, Gulf filling the gap."
Capital flows are shifting towards U.S. refined oil exports and freight rates. The crack spread reaching $60 indicates that profits are shifting from crude oil producers to refineries that are still operational and traders who can secure cargo. The ban itself has limited incremental impact—shipments had already halved by June—the real effect is to legally clear remaining export capacity, forcing Turkey and Brazil to bid in the Atlantic basin.
Comparing to the 1970s oil embargo, this situation resembles a doubled version of the 2022 European diesel crisis: on one side, Gulf logistics are disrupted, and on the other, Russian refineries are prioritized for domestic demand after being attacked by drones. The industry phase is shifting from a narrative of crude oil security to one of refined oil security. The IEA repeatedly emphasizes that inventory replenishment cannot keep up with the decline in product trade, indicating that the bottleneck lies in the geographical location of conversion capacity, not in underground reserves.
Structural judgments belong to the reconstruction of the industrial chain. Crude oil can still partially bypass the strait, but diesel must be close to refineries and docks. The mechanism is: war re-prices "where can refine, which ships dare to load"; whoever controls the unstruck conversion capacity and export berths takes the premium for middle distillates; a drop in crude oil futures does not reduce pump prices because the intermediate layer of factories and shipping routes has already been dismantled.
ABAB News · Cognitive Laws
- Crude oil can reroute, diesel cannot relocate.
- When the second export source closes, the first shortfall becomes a crisis.
- The crack spread indicates which layer is truly lacking more than oil prices.