Please see the below article from WH Ireland detailing their discussions on oil prices, notably the Diesel markets. Received this morning 10/11/2026.
Crude oil has fallen sharply since the end of October as expectations of a further escalation in the Iran conflict have eased. Yet the retreat in oil prices does not necessarily signal an end to the energy shock. Diesel markets tell a more complicated story, with refining margins remaining elevated despite the recent decline. The divergence highlights why crude prices alone can provide an incomplete picture of inflationary pressures.
The diesel crack spread measures the difference between the price of diesel and crude oil, providing an indication of refining margins and the relative balance between supply and demand for refined products. When the spread widens, diesel is becoming more expensive relative to crude, potentially signalling tightening supplies, stronger demand or constraints in refining capacity.
The scale of the recent move is significant. Before the outbreak of the Iran conflict on 28 February, the European diesel crack spread averaged approximately $31 per barrel, against Brent crude at around $69. This averaged around $45 in June, rising to approximately $72 in July and $81 in August, before approaching $98 in early September. Although margins have since retreated, they remain considerably above their earlier levels. The recent decline in crude prices has also contributed to some narrowing in refining margins, but this does not necessarily indicate that underlying supply pressures have been resolved.
Diesel is particularly important because it underpins global economic activity, powering freight transport, shipping, agriculture, construction and heavy industry. Geopolitical disruption reduced Russian and Middle Eastern exports, refinery constraints and depleted inventories have all contributed to tighter middle-distillate markets. The International Energy Agency estimates that global diesel exports in September were 700,000 barrels per day lower year-on-year, while it expects supply constraints to persist into 2027.
For the wider economy, sustained increases in diesel prices can feed into transportation, manufacturing and food production costs, extending inflationary pressures beyond the energy sector. Lower crude prices should provide some relief to headline inflation, but elevated refined-product costs could prove more persistent, particularly if businesses pass higher operating costs on to consumers.
Ultimately, the outlook will depend on whether the recent decline in crude marks a lasting easing of geopolitical risk or simply a temporary repricing, while refined-product supply remains constrained. Although inflationary pressures have not disappeared, lower energy prices offer a potential counterbalance. The balance between these competing forces will be important in determining the path of inflation, interest rates and the wider economic outlook.
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Alex Clare
10/11/2026