Diesel supplies in Asia are expected to surge in 2024 due to new refineries in the Middle East and strong export activity from China. This is likely to outpace demand growth in the region.
As a result, diesel prices are expected to fall and Asian refiners face a second year in a row of declining profit margins for using the fuel in cars, trucks and power generators.
Last year, average diesel profit margins jumped to an all-time high of $45 a barrel. This follows supply from major exporter Russia being affected and global inventories falling to record lows.
In contrast to this year, margins fell by nearly 50% in 2023 after Beijing allowed more fuel and refining export activity around the world to ramp up output.
In 2024, with the existence of additional supply. Average diesel margins are expected to shrink 23% to around $18 per barrel based on reports from Rystad Energy, Sparta Commodities and FGE.
In addition, supply in Asia, including the Middle East, is expected to increase by around 3.8% year-on-year starting in 2024 according to Wood Mackenzie's forecast data.
According to analysts, margins are likely to shrink even though Asia, led by India, remains the driver of global diesel demand in 2024 through the transport and construction sectors.
Diesel supplies in the Middle East will continue to increase as the new refineries of Al-Zou in Kuwait and Duqm in Oman increase production and exports.
China's fuel exports may rise at least in the first half of 2024 as traders expect Beijing to release more quotas that will allow refiners to export excess supplies and take advantage of higher prices overseas.
According to Chinese customs statistics, diesel exports are likely to jump more than 19% in 2023 compared to the previous year and account for more than 30% of China's total refined fuel exports.
