Morgan Stanley warned of prolonged fuel shortage due to massive refinery maintenance
The global refined products market could remain tight until at least mid-2027. Even an easing of military conflicts in the Middle East and Ukraine would not guarantee rapid recovery of fuel supplies. An additional factor will be a broad wave of scheduled refinery maintenance, which has been deferred for a long time.
This forecast is contained in a Morgan Stanley research note dated October 20, which was reported by Bloomberg. At the same time, the risks of a prolonged diesel shortage are confirmed by research from the International Energy Agency (IEA) and S&P Global Energy.
According to Morgan Stanley analysts Martijn Rats and Charlotte Firkins, in the second quarter of 2027 the scale of planned refinery maintenance turnarounds could increase by an equivalent of 3.4 million barrels per day of refining capacity. This is about 2.5 times higher than the usual seasonal level and exceeds current processing losses in Russia and Middle Eastern countries.
In recent months many refineries have postponed scheduled maintenance, trying to make the most of high prices for finished fuels. However, equipment maintenance cannot be postponed indefinitely, so next year plants will have to idle part of their capacity.
The main concern is the second quarter of 2027, when maintenance turnarounds may coincide with a slow recovery of refined product output in regions affected by military actions.
Similar risks were previously described by Argus Media in its global refined products market review. Analysts pointed to depleted inventories, refinery disruptions and changing international trade routes. They estimate that the recovery of refined product supply will be more difficult than the recovery of crude oil supply.
Diesel shortage already confirmed by IEA data
In its October report, the International Energy Agency also warned that the global diesel and gasoil market will remain tight for much of 2027.
According to IEA data, in September world exports of diesel and gasoil fell by about 700,000 barrels per day compared to last year. The combined reduction in exports from Russia and the Middle East amounted to 1.3 million barrels per day. Increased supplies from the US and China were only able to partially offset these losses.
The situation in the Middle East is especially difficult. In September, exports of refined products from the region stood at about 1.9 million barrels per day, compared with 4.7 million barrels per day before the start of the war. At the same time, crude oil supplies are recovering noticeably faster.
The IEA forecasts that in October global refining runs will fall to a seasonal low of 81.3 million barrels per day, and will recover to 84.6 million barrels per day by the end of the year. However, even this will not allow diesel inventories to be rapidly replenished, as they have been declining over previous months.
The agency allows for the emergence of a diesel production surplus as early as the first quarter of 2027, but stresses that it will be insufficient to offset the accumulated shortage. Inventory recovery beyond normal seasonal fluctuations is expected no earlier than the second half of 2027.
European market remains tight
Analytical company S&P Global Energy reported on October 19 that the diesel shortage in Europe persists despite attempts to increase supplies.
S&P Global estimates that on October 16 the spread between the European diesel price and the base crude price, known as the crack spread, exceeded $74 per barrel. In early October, this indicator was mostly near $60. This dynamic reflects the sustained high value of diesel relative to crude.
Earlier, representatives of US refining company Phillips 66 told S&P Global that companies are trying to maximize diesel production. At the same time, expensive sea freight makes it difficult to deliver refined products to regions with the highest demand.
At the same time, high diesel prices do not mean equally high profitability for all refineries. According to information from Financial Times, European refiners have faced reduced profitability due to higher feedstock costs and record transportation expenses.
The IEA also notes that the worsening economics of plant operations in Europe and Asia may prompt less efficient facilities to reduce processing. This creates an additional risk to fuel supply even with sufficient volumes of crude oil.
Russian refineries remain an additional source of risk
A separate factor in the shortage is damage to Russian refining infrastructure as a result of Ukrainian attacks. In its September study, the IEA noted that in June 2026 Russian refining volumes fell to 3.8 million barrels per day – the lowest level in more than 20 years.
The agency estimates that diesel production in Russia decreased by almost 30% compared to the previous year. This forced the Russian government to restrict exports of refined products to ensure the domestic market.
The IEA does not expect a quick recovery of Russian refineries due to accumulated equipment damage. Accordingly, even an easing of export restrictions will not necessarily lead to a significant increase in international diesel supplies.
Implications for the Ukrainian fuel market
For Ukraine, a prolonged shortage of refined products poses an additional risk due to the domestic market's dependence on imported fuel. Trucking, agriculture, industry and enterprises using diesel generators remain the most sensitive to changes in procurement prices.
A rise in diesel prices is already observed at Ukrainian gas stations. According to the A-95 Consulting Group, on October 20 the average retail price of diesel fuel was 102.23 UAH per liter, and on October 21 it increased to 102.59 UAH.
It was previously reported that even amid a correction in global oil prices, the diesel shortage remains a serious problem for the international energy market.
Future refinery maintenance turnarounds could extend the period of high procurement prices for oil products. However, the Morgan Stanley forecast concerns the global supply balance and does not contain specific calculations of retail prices in Ukraine. They will also depend on the exchange rate, logistics costs, competition between importers and tax conditions.
