https://www.agbi.com/ :Diesel prices are likely to remain unusually high into the first quarter of next year even if Saudi Arabia promptly repairs its East-West oil pipeline, analysts have told AGBI.

A drone attack launched from Iraq on the Yanbu-Abqaiq pipeline, coupled with a pause in shipping from the kingdom’s key Red Sea energy hub, has driven another surge in prices over the past week.

Diesel crack spreads – an important measure of the margin available from turning crude oil into diesel – hit record levels last month, repeatedly exceeding $100 a barrel. The global shortage is squeezing markets and piling costs on drivers.

Even before the latest disruption in Saudi Arabia, prices were expected to remain elevated throughout the Northern Hemisphere winter, according to Iman Nasseri, senior vice president, Middle East and Asia, at consultancy FGE NexantECA.

The diesel market has been running short for months due to disruption from the Iran war to global shipping through the Strait of Hormuz and more recently a spate of attacks by Ukraine on Russian refineries.

Saudi Arabia is seeking to get around half of the pipeline’s daily oil flow pumping again within days and fully restored in around six weeks, Bloomberg reported on Thursday.

But a longer outage could further tighten supplies if Saudi Arabia is forced to choose between exporting crude through the Red Sea and feeding refineries located on the Red Sea coast near Yanbu, a vital industrial zone and the region’s main port.

If it does, Nasseri said, “then we’re going to have a bigger problem”.

Nearly 30 million barrels of diesel and gasoil are supplied globally each day, according to FGE NexantECA figures for 2025.

The shortage of diesel is currently running at 270,000 barrels per day, but only about 12 million bpd are actually traded – meaning even a seemingly small shortfall can push up prices.

“We already expected the market to be 270,000 barrels per day short year-on-year in the fourth quarter,” Nasseri said.

“This means continued and sustained high diesel cracks throughout the rest of this year and potentially next year as diesel remains structurally tight through 2027 and vulnerable to every disruption.”

Diesel prices in Europe and the US have recently traded at about twice the price of Brent, at around $220 a barrel, according to Ole Hansen, head of commodity strategy at Saxo Bank.

The effects are also spreading beyond oil markets to fuel-intensive industries as well as hitting people in the pocket.

“Diesel is a critical input for road freight, agriculture, construction, mining and manufacturing, meaning sustained high prices eventually feed into transportation costs and consumer prices.”

Diesel costs reached record highs of $6.40 a gallon in the US, according to the US Automobile Association, while the United Arab Emirates Fuel Price Committee raised diesel costs for the second month in a row in September – increasing by 13 percent to AED4.30 ($1.17) per litre.

The US Energy Information Administration has also raised its outlook for both diesel prices and refining margins. It expects US retail diesel to average $5.55 a gallon in the fourth quarter and $4.40 in 2027, while US distillate inventories are forecast to remain below their five-year low through the first quarter of next year.

While crude oil prices have not risen to the same extent as diesel, they are also substantially higher than before the conflict began on February 28.

Brent crude, the global benchmark, was trading at $103 per barrel on Thursday, more than 50 percent higher than at the start of the war when it fetched about $68 per barrel.

“While crude is tight, refined products remain the epicentre of the energy squeeze,” Hansen said.