BMI Ups Global Diesel Price Forecast

In a BMI report sent to Rigzone by the Fitch Group on Friday, BMI analysts revealed that they had increased their global diesel price forecast for this year.

“We have revised up our 2026 diesel price forecast, as we move to our ‘extend to end’ [conflict] scenario, which calls for another four weeks of hostilities,” the BMI analysts said in the report.

“The global average diesel price is now forecast to be $111 per barrel versus our previous view of $89 per barrel,” they added, pointing out that this was a rise of 25.1 percent.

The analysts stated in the report that the escalation in the Middle East has sharply tightened the global diesel market and forced a significant reassessment of the near-term price outlook.

“In our view, the recent rally reflects more than higher crude input costs,” they said.

“The more important driver has been disruption to refined-product trade flows, tighter shipping availability, rising freight and insurance costs, and a sudden deterioration in prompt supply conditions,” they noted.

“Diesel markets are especially vulnerable to this type of shock because middle distillates are heavily dependent on seaborne trade from the Middle East,” they warned.

The analysts outlined in the report that diesel prices are expected to remain elevated over the next four weeks “before a cessation of open hostilities reduces prices sharply as the bulk of the risk premium for the conflict abates”.

“The U.S.-Iran conflict is expected to continue for another four weeks (up to eight weeks total from February 28, 2026) with high-intensity operations according to our Country Risk team,” the BMI analysts highlighted.

“However, the conflict stays contained - i.e., it does not spiral into uncontrolled, region-wide war and a diplomatic off-ramp remains viable. In our ‘extend to end’ scenario, the conflict lasts around eight weeks (vs ~four previously), raising risks to infrastructure, prolonging disruption through the Strait of Hormuz, and lengthening recovery,” they added.

“This means that the diesel supply shortfall is larger and more persistent than initially expected given that Gulf spare capacity is itself constrained by Hormuz access,” they continued.

“With Gulf crude and fuel production cuts exceeding 10 million barrels per day and Hormuz flows dropping from ~20 million barrels per day to ~2 million barrels per day (only ~3.5-4.5 million barrels per day rerouted), we assume an implied deficit of ~13 million barrels per day+ that is met mainly via inventory drawdowns, with tightness extending beyond the conflict window,” they went on to state.

The BMI analysts noted that this supports their increase of the 2026 annual average Brent forecast to $78 per barrel, from a previous prediction of $70 per barrel. They outlined, however, that risks are “skewed wide; from a faster ceasefire and retracement, to escalation outcomes around $85-110 per barrel and a tail risk of $100+ per barrel annual averages under a multi-month engagement”.

“However, the price gains seen across the refined fuels complex have outpaced those of Brent as the supply disruptions have been more impactful in key import dependent markets particularly those in Asia,” the analysts pointed out.

In the report, the analysts projected that the global diesel price will average $111 per barrel this year, $98 per barrel in 2027, $93 per barrel in 2028, $91 per barrel in 2029, and $90 per barrel in 2030. The report showed that this price came in at $91 per barrel last year and highlighted that the spot price was $166 per barrel.

In a BMI report sent to Rigzone by the Fitch Group on February 2, BMI analysts announced that they had raised their global average diesel price by 2.3 percent to $89 per barrel from their previous forecast of $87 per barrel “as geopolitical tensions support higher prices to start 2026”.

“Weaker Brent prices in 2026 will suppress global diesel price upside with margins continuing to contract on tepid demand growth and new supply,” the BMI analysts projected in that report.

“Long-term diesel prices will be governed by the gradual easing of the structural oversupply as markets eventually move to undersupply by 2031,” they added.

That BMI report forecast that the global diesel price would average $89 per barrel this year, $93 per barrel in 2027, $90 per barrel across 2028 and 2029, and $89 per barrel in 2030.

To contact the author, email andreas.exarheas@rigzone.com