Will Russia save Trump from record fuel prices? Analysis 

The main thing in the material:

• The Presidents of the United States and Russia, Donald Trump and Vladimir Putin, have agreed to supply Russian diesel to the world market. For this purpose, the US Treasury has issued a special license. Initially, it is planned to supply more than 300 thousand tons of diesel, in November — another 500 thousand tons.
• Diesel prices in the United States have risen to a historic high. On September 21, the average retail price reached $6.53 per gallon. By the beginning of October, it had decreased, but remained significantly higher than last year.

• Before the crisis, Russia and the Persian Gulf countries accounted for 45% of the world's seaborne diesel and gas oil trade. In August, their combined net exports decreased by 1.6 million barrels per day compared to February.
• American refineries have almost exhausted their ability to quickly increase fuel output. At the beginning of September, their utilization was approaching 98%. There is spare capacity in China, but Beijing periodically restricts supplies for the sake of domestic market stability.
• Washington considered banning diesel exports, but rejected this measure. The restrictions could temporarily increase domestic reserves, but subsequently force refineries to reduce processing and production of other fuels.
• The G7 accelerated the release of 100 million barrels of oil and petroleum products from strategic reserves. Together with the planned increase in supplies from Russia and China, this may ease the deficit, but analysts do not expect a quick way out of the crisis.

The United States has agreed to ease sanctions against Russian diesel — Trump announced a new agreement with Putin on the supply of fuel to the world market. The reason is the acute shortage of petroleum products after a reduction in exports from Russia and the Middle East. In September, the retail price of diesel in the United States set a historical record, exceeding $6.50 per gallon. American refineries are operating at almost their limit, so Washington is looking for additional volumes of fuel around the world. China has free processing capacity, but restricts exports for the sake of domestic market stability. Meanwhile, the G7 countries agreed to accelerate the release of 100 million barrels from strategic reserves. Izvestia investigated whether these measures would be enough to overcome the diesel crisis.

Oil is coming back, diesel is not

There has been a noticeable shift in the global oil market in recent months. By the end of September, JPMorgan estimated that shipments of black gold from the Middle East had almost returned to pre—war levels of 17.5 million barrels per day. However, this recovery proved to be unsustainable. After new attacks on tankers in early October, shipments through the Strait of Hormuz dropped sharply to 4 million barrels per day.

At the same time, the situation with petroleum products remained much more complicated even during the recovery of oil supplies. By the end of September, their exports from the Middle East reached only 58% of the pre-war level, or about 3 million barrels per day. Thus, interruptions in the supply of raw materials were supplemented by a steady shortage of finished fuel: the situation is most acute in the diesel market.

In August, global refineries processed 81.4 million barrels of oil per day. Despite an increase of almost 1 million barrels compared to July, this is 4.2 million barrels per day less than a year earlier. The International Energy Agency (IEA) notes that the capacity to increase processing is close to the limit. Therefore, the restoration of the flow of raw materials did not lead to a decrease in diesel prices: there was more oil on the market, but there was no one to quickly turn it into additional volumes of fuel. At the time of the publication of the September IEA report, Brent futures were trading at $105 per barrel, 45% higher than the pre—war level.

At the same time, the cost of diesel in the United States exceeded $200 per barrel and turned out to be 94% higher than the pre-war price. And its average retail price reached $6,529 per gallon on September 21, a record in the history of observations. Then it began to decline to $6.4—6.2, but it is still about 70% more than the level of a year ago. On the West Coast, the price reached $7.2 per gallon, only in California it was $8.

American refineries cannot quickly increase fuel output. At the beginning of September, they were working almost at the limit: the load reached 98%. By the end of the month, it had dropped to 92.5% due to the start of the autumn renovation season.

High global demand created an incentive for American refineries to export fuel. Net exports of distillates from the United States have been near five-year highs since February, while inventories, on the contrary, have been declining to their lowest levels. So, at the end of August, American diesel exports averaged about 1.77 million barrels per day, and by the end of the month reached a record 54.2 million barrels. High shipments abroad continued in September: in the last week of the month, distillate exports amounted to about 1.5 million barrels per day, which is almost a third of the total volume of their production in the United States.

At the same time, the situation with reserves continued to deteriorate. By early October, distillate stocks in the United States had dropped to 105.1 million barrels from 107.9 million in mid-September, when they had already reached a seasonal low since 1982. This trend, coupled with lower production due to refinery shutdowns for maintenance and a seasonal increase in demand (harvest and heating season), will support domestic diesel fuel prices. At the same time, the Energy Information Administration (EIA) under the US Department of Energy predicts a gradual decrease in diesel prices: in 2027, the average retail price will be $4.49 per gallon compared to $5.19 in 2026. This is due to the expected reduction in oil prices and partial recovery of distillate reserves, which, however, will remain below the five-year average.

Reserves instead of prohibitions

Against this background, in September, Washington began discussing limiting diesel exports to curb prices (which is especially important for Republicans to achieve before the November midterm congressional elections). However, many analysts questioned the effectiveness of the measure, warning that it would only have a short-term effect: if diesel remained in the country, its reserves would increase, after which refineries would have to reduce processing. At the same time, along with diesel, the output of other fuels, including gasoline, will decrease, since they are produced together. As a result, fuel prices will only rise after the storage facilities are filled.

Trump initially supported the idea of introducing a temporary ban on diesel exports, probably in order to put pressure on European buyers. Washington demanded that the allies actively release fuel from reserves to help stabilize prices. As a result, the G7 countries agreed to release 100 million barrels of oil and petroleum products from strategic reserves within four months, with a significant amount of diesel expected to enter the market in the near future. At the same time, the countries of the group agreed not to impose restrictions on mutual trade in energy resources. After that, Trump said that the United States had no intention of restricting diesel exports.

The market reacted immediately: European diesel futures fell by about 8% to $1,338 per 1 ton, the lowest level since early September. American wholesale diesel in New York Harbor dropped by almost 2%, to about $4.56 per gallon. However, after the IEA clarified that the release of additional volumes (in excess of the already agreed 100 million barrels) has not yet been discussed, European diesel futures went up again, reaching $1,435 per 1 ton during trading.

The actions of the G7 and the IEA allowed the United States to abandon the discussion of export restrictions and at the same time increase the supply of fuel on the world market. However, the effect will be limited in time. The release of barrels from strategic reserves may compensate for some of the lost supplies in the coming months, but it does not solve the problem in the long term: the lack of refining capacity has not gone away.

China opened the valve a crack

China remains one of the few major producers capable of relatively rapidly increasing the processing and supply of petroleum products to the world market. Chinese factories are loaded at 75% of their maximum capacity. However, the availability of spare capacity does not mean that Beijing is ready to use them to cover the global deficit.

After the beginning of supply disruptions through the Strait of Hormuz, China sharply reduced oil purchases. In June, imports fell to about 7.15 million barrels per day, an almost ten—year low. Chinese refineries tried not to buy sharply more expensive raw materials and used up their already acquired reserves. At the same time, Beijing has restricted fuel exports for the sake of domestic market stability. In July, China opened the valve: oil imports increased by 22% in a month to 8.4 million barrels per day, although they remained almost 25% below the level of a year ago.

Thus, China is able to quickly increase the supply of petroleum products, but its capabilities are limited from two sides at once: for additional processing, the country has to buy more oil, increasing demand for raw materials and putting pressure on its price. If oil prices rise faster than petroleum products, the refining margin decreases. At the same time, the increase in exports accelerates the depletion of domestic fuel reserves. In addition, analysts believe that Beijing's October decision will only slightly ease tensions in the global fuel market.

Diesel diplomacy

The problem for Washington is that none of the available sources of diesel is able to make up for the lost volumes alone. Strategic reserves are finite, free processing capacity is concentrated outside the United States, and the increase in supplies depends not only on market prices, but also on decisions of other states.

Therefore, the United States is trying to influence almost all possible sources of diesel supply. During Chinese President Xi Jinping's September visit to Washington, Trump asked him to increase production of petroleum products to stabilize the global market. At the same time, he called on Ukrainian President Volodymyr Zelensky to stop attacks on Russian refineries and put pressure on G7 partners to accelerate the release of barrels from strategic reserves. Finally, on October 9, the US Treasury issued a temporary license (valid until April 7, 2027) for operations with Russian diesel. Trump also announced an agreement with Putin on the supply of more than 300,000 tons of diesel in the near future, another 500,000 tons in November and 1 million tons after that. In turn, Putin confirmed Russia's readiness to supply oil and petroleum products to the markets of the United States and other countries. According to Deputy Prime Minister Alexander Novak, Russia is beginning to lift restrictions on diesel exports ahead of schedule and is ready to start shipping it to the United States as early as October.

Taken together, these measures can significantly reduce the shortage of diesel on the global market. However, their effectiveness will depend on how quickly the declared volumes turn into actual supplies. China's ability to increase exports, resume shipments from the Persian Gulf states (subject to the stabilization of shipping through the Strait of Hormuz) and reduce consumption under pressure from high prices will also play an important role.

According to estimates provided by Reuters, the shortage of diesel in the global market may persist until 2027. According to the IEA forecast, the average volume of oil refining in Russia will be about 4 million barrels per day by the end of 2026 and in 2027. At the same time, Kpler predicts that the production of petroleum products in the Middle East will return to pre-war volumes, most likely not earlier than the second quarter of next year. The main limiting factors are logistics and damage to the refinery. So analysts do not expect a quick way out of the diesel crisis.