Diesel costs more than 70 dollars above crude because the refineries are missing

The premium for European diesel over Brent crude has risen from around 25 dollars a barrel at the start of 2026 to more than 70 dollars. The crude price itself is almost a third below its peak during the war with Iran.

That combination is unusual and does not come from production volumes. It comes from refining.

Brent last traded at around 88 dollars a barrel. The day before, the price had fallen by more than two percent to 87.07 dollars, and the American grade West Texas Intermediate by more than two percent to 81.25 dollars. Traders weighted weaker demand more heavily than the war that is still running.

The short version

• The premium for European diesel over Brent rose in 2026 from around 25 to more than 70 dollars a barrel.
• Crude itself trades almost a third below its peak during the war with Iran, with Brent last around 88 dollars.
• Refining capacity in the Middle East is expected to run 2.2 million barrels a day below the pre war level in the third quarter.

Refining runs 2.2 million barrels below the pre war level

The bottleneck is at the refineries. According to an assessment by Reuters Breakingviews, refining capacity in the Middle East will probably run 2.2 million barrels a day below the level before the war during the third quarter.

Crude on its own is worthless to consumers. It has to be turned into petrol, diesel, kerosene and other products. When refining capacity drops out, a surplus builds up in the raw material and a shortage builds up in the finished product at the same time.

That is exactly what the current numbers show. The crude price falls because supply is sufficient. The diesel price rises because the plants that turn it into fuel are missing.

Why this hits Europe hardest

Europe is more exposed to this constellation than other regions. The continent consumes more diesel than it produces and imports the difference.

The premium on diesel therefore feeds straight into transport costs. It hits hauliers, farming and construction, and through the supply chains it reaches consumer prices in the end.

In several countries that is already visible. The Italian budget watchdog names rising energy costs from the Middle East conflict as the main risk to the debt reduction plans of the country from 2027. In Greece heating oil was more than half more expensive in April than a year earlier. Poland cut value added tax on petrol and diesel until 31 August.

The Strait of Hormuz remains the uncertainty

The situation in the region has sharpened again. Iran rejected an account by the American president about the strait, while a report about an attack on a ship went around.

A considerable share of the world trade in oil and liquefied gas runs through that strait. A disruption there does not act on production volumes but on the transport route, and it hits buyers in Asia and Europe at the same time.

That the crude price is falling despite this situation suggests traders currently regard demand as the weaker factor.

China builds capacity for liquefied gas

In parallel China has presented its new five year plan for oil and gas. It provides for a receiving capacity for liquefied natural gas of 200 million tonnes a year by 2030.

Natural gas storage is to grow to more than 13 percent of national consumption. For imports through onshore pipelines a capacity of 114 billion cubic metres a year is targeted, and several large gas projects are being accelerated.

For the world market that means additional demand for liquefied gas built up over the coming years. Unlike diesel, this is not about missing refining capacity but about the planned construction of infrastructure.

Frequently asked questions

Why does diesel rise while crude falls

Crude on its own is worthless to consumers and has to be turned into petrol, diesel and kerosene. When refining capacity drops out, a surplus builds in the raw material and a shortage builds in the finished product at the same time. That is what the current prices show.

Why does this hit Europe in particular

The continent consumes more diesel than it produces and imports the difference. The premium therefore feeds straight into transport costs and hits hauliers, farming and construction, and through the supply chains it reaches consumer prices in the end.

What role does the Strait of Hormuz play

A considerable share of the world trade in oil and liquefied gas runs through that strait. A disruption there does not act on production volumes but on the transport route, and it hits buyers in Asia and Europe at once. That crude is falling anyway points to a weaker demand side.

This analysis is for information only and is not investment advice.