DTN Oil Update
Oil Mixed as IEA Warns of Prolonged Diesel Supply Shortage
VIENNA (DTN)-- Oil futures were mixed Wednesday morning as traders were assessing the latest escalation in hostilities in the Middle East as well as an International Energy Agency projection warning of a prolonged diesel shortage.
By 09:20am EDT Wednesday, ICE Brent for December delivery was down $0.06 to trade near $105.63 barrels (bbl), while NYMEX WTI for November delivery rose $1.31 to $95.45 bbl.
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Downstream, NYMEX ULSD for November delivery retreated $0.0474 to $4.8870 gallon, and front-month RBOB futures fell $0.0282 to $3.2219 gallon.
The U.S. dollar index jumped following this morning's higher-than-expected U.S. inflation reading, up 0.605 points to 102.585 against a basket of foreign currencies.
Like OPEC's October report published Tuesday, IEA's 2026 demand outlook also grew more bearish, revising the expected oil demand decline for this year from 2.5 million bpd to 2.6 million bpd. Diesel demand, plagued by soaring prices and a worsening global economic outlook, is expected to account for a quarter of this drop.
The loss in diesel supply, however, has dwarfed the substantial decline in demand, the Paris-based energy watchdog said, leading global inventories to deplete at a rapid clip. Given that this diesel supply imbalance is far from being rectified, IEA warned that global diesel markets may be heading into peak winter demand season without sufficient shock absorbers.
The expected recovery in refinery runs over the next two months, even if it continues to accelerate, won't be enough to eliminate the supply shortage, meaning that inventories are bound to stay depleted until well into 2027, IEA said.
Increasing Houthi attacks on Saudi Arabia, meanwhile, kept the spotlight on supply risks. While the latest wave has largely spared oil infrastructure, successful strikes on some of the country's best protected assets, like on the Riyadh international airport last Saturday, have highlighted the fragility of the ongoing oil supply recovery from the Middle East. On Wednesday, the Saudi energy ministry reported that one of Saudi Aramco's headquarter buildings was among the latest targets struck by the Tehran-allied Yemeni militia.
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