Middle distillates deficit projected to extend into next year on processing shortfalls

Worldwide supplies of middle distillates are poised to remain restricted through the upcoming winter and into the following year, as global processing infrastructure struggles to offset output deficits from major supply hubs, according to statements from refining and commodity merchant leadership reported by Reuters.

The structural deficit stems from substantial volume shortfalls across traditional export centres. Available refining systems have been unable to bridge the gap left by reduced manufacturing runs and export flows originating in the Middle East as well as Russia.

Speaking at the Asia-Pacific Petroleum Conference, Russell Hardy, chief executive officer of trading house Vitol, highlighted the scale of the current supply gap. Hardy stated that the market is facing an acute product deficit, pointing to an aggregate loss of roughly 4 million barrels daily from key regions.

Specifically, Hardy noted that the global balance is lacking 2 million barrels per day of output from Russian sources, alongside an additional deficit of close to 2 million barrels per day from Middle Eastern facilities. This combined shortfall continues to place upward pressure on fuel balances as downstream demand moves into the winter heating and transport season.

Market participants anticipate that without significant additions to operational distillation capacity elsewhere, product balances will struggle to normalise over the near-term horizon.