IEA says diesel stays tight well into 2027 as Houthi strikes on Aramco put the Gulf supply recovery at risk

The details

The IEA outlook. In its October Oil Market Report, published Oct. 14, the IEA said the gasoil market (which includes diesel) will stay tight “well into 2027.” It expects gasoil to move back into surplus in the first quarter of 2027, but not by enough to rebuild inventories, and says replenishment is unlikely before the second half of 2027.

The numbers behind that view:

• Global diesel exports in September were about 700,000 barrels a day lower than a year earlier, with lost supply from Russia and the Middle East totaling 1.3 million barrels a day.
• OECD gasoil stocks fell to 565 million barrels in July, the lowest since November 2023. Global on-land oil stocks are at their lowest since at least 2016.
• Diesel hit record highs of about $220 a barrel in Europe and the U.S. in September, and above $200 in Singapore. BERNAMA, reporting on the IEA findings, said benchmark diesel prices have eased since but remain nearly double crude prices and almost double pre-crisis levels.
• Middle East refined product exports are running at 1.9 million barrels a day, against 4.7 million before the war.

The IEA said record diesel prices are raising the cost of goods and weighing on activity. Without a recovery in Middle East product supply, it warned, further demand cuts may be needed to balance the market.

The recovery the IEA called “fragile.” Gulf crude exports rose 4.4 million barrels a day to 13.9 million in September, above 75% of pre-war levels, and Strait of Hormuz flows reached 10.9 million barrels a day. Brent futures were still around $107 a barrel when the report was written, up 13% since early September, after the Sept. 11 bombing of Saudi Arabia’s East-West Pipeline and sharply higher tanker rates.

The new strikes. Late on Oct. 13, a Houthi strike hit Aramco’s headquarters complex in Dhahran, which houses an operations center overseeing rigs, pipelines, refineries and export terminals, Reuters reported. Three sources said a fire spread across several floors; the Saudi energy ministry called it a “limited fire,” and two sources said operations continued normally. AP, citing regional officials, said the top three floors of a building used by senior executives were damaged, with no casualties reported.

The Houthis said they also targeted Riyadh’s King Khalid International Airport and an Aramco refinery in Riyadh, and urged shipping companies and workers to evacuate Saudi airports and oil facilities. Strikes on the airport have killed at least 18 people over the past week, according to AP. President Trump said he is evaluating whether the U.S. should join Saudi strikes on the Houthis, AP reported.

Update, Oct. 15. Attacks on shipping near the Strait of Hormuz have picked up. The Singapore-flagged container ship GFS Pride sank after a projectile strike, with all 21 crew evacuated, and Fox News counted 10 attacks on ships in the week through Tuesday. Very large crude carrier rates from the Gulf to Asia reached about $36 a barrel, more than five times pre-war levels, the same report said. Brent settled at $106.06 on Oct. 14, then eased to about $104 on Thursday, according to Trading Economics, as traders weighed the shipping risk against weaker demand. FinanceFeeds, citing Reuters, reported that Washington is weighing easing sanctions on some “shadow fleet” tankers that have carried Venezuelan, Russian and Iranian oil to bring record freight rates down; shippers would have to apply to the Treasury, and no decision has been made.

Shipping. The Houthis have tried since July to close the Bab el-Mandeb Strait to Saudi-linked traffic, FreightWaves reported, though no broad Red Sea closure has been confirmed. A Freightos analyst described the immediate effect as “uncertainty rather than a confirmed capacity shock.”

What the outlook means for fuel surcharges

Most truckload fuel surcharges take the weekly DOE/EIA diesel price, subtract a base price set in the contract and divide by an assumed miles-per-gallon figure. The table shows how sensitive that formula is, using a 6.5 mpg assumption. These are our illustrative calculations, not forecasts.

The point for 2027 bids: an index-linked surcharge passes declines back to you automatically if Gulf supply recovers, while a fixed all-in rate quoted today locks in a carrier’s view of peak risk.

What procurement teams should do

• Keep fuel separate from linehaul in 2027 awards. Ask carriers to quote linehaul excluding fuel, and apply your own surcharge table tied to the weekly DOE/EIA diesel index.
• Audit the base price and mpg in every table. Small differences compound over a year of high diesel; see our fuel surcharge worked example.
• Budget for a long plateau. Plan 2027 freight and delivered-cost budgets on the IEA’s view that stocks won’t rebuild before the second half of the year, with a scenario for a further spike if Gulf attacks escalate.
• Ask suppliers how fuel is priced in delivered costs. For delivered-price categories such as packaging, chemicals and aggregates, request the fuel component and the index it follows so increases can be checked and reversed.
• Review energy-linked clauses. Check which contracts reopen on energy price triggers and whether the triggers reference diesel, Brent or a regional benchmark.

What to watch next

• Saudi response and U.S. involvement. Saudi Arabia has promised a serious response, and the White House is weighing joining strikes on the Houthis. A wider campaign raises the risk to Gulf exports and Red Sea shipping.
• Weekly DOE/EIA diesel prices. The Monday release is the index most carrier surcharges follow; watch whether the recent easing reverses after the Aramco strike.
• U.S. tanker sanctions. If Washington lets shippers apply to use some sanctioned tankers, crude and product freight rates could ease; watch for a Treasury announcement.
• The IEA’s November Oil Market Report. It will show whether Gulf product exports kept recovering in October or slipped back.

The bigger picture

Diesel has been the hardest-hit fuel since the U.S.–Iran war cut Middle East product exports, and October’s policy responses, including the Russian supply deal and the red-dye diesel order, have done little to change what fleets pay. The IEA’s report moves the expected end of the squeeze from this winter into the second half of next year.

That matters because 2027 freight bids are being run now, with truckload contract rates at a 52-week high. Procurement teams that keep fuel indexed and transparent will capture any relief quickly; those that accept fixed all-in rates will carry today’s risk premium for the full contract term. The same attacks are also disrupting Saudi air cargo capacity.