Diesel glut hits refiners struggling to recover from coronavirus fallout

Diesel stocks balloon. (Shutterstock)
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Updated 05 June 2020
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Diesel glut hits refiners struggling to recover from coronavirus fallout

  • Dozens of tankers carrying diesel are moored off Europe’s coast as refiners in Asia, the Middle East and the US wait to find a buyer

LONDON: Brimming diesel inventories and stronger oil prices are driving down refining profits, stifling incentives to hike production even as fuel demand recovers from the coronavirus hammering.

European cracks, the profit margin for producing diesel from crude, has hit an all-time low, while cracks in the US and Asia have also plummeted.

With diesel accounting for around 50 percent of the output of an average refinery, any weakness hits refiners’ recovery plans.

Dozens of tankers carrying diesel are moored off Europe’s coast as refiners in Asia, the Middle East and the US wait to find a buyer.

“The situation looks awful,” an executive at a big European refiner said.

Consumption, particularly by airlines, is expected to take years to recover to pre-coronavirus crisis levels, pushing many refineries to continue low processing run rates, while some may need to shut down altogether, analysts said.

“This situation is not going away and will only be resolved by refinery closures,” said Robert Campbell, head of oil products at consultancy Energy Aspects.

He said that at least 1 million barrels per day (bpd), or about 1 percent of global refining capacity, would need to close.

The US refined products crack spread, a proxy for refining margins, is hovering around $9 a barrel, compared with nearly $21 at the same time last year, according to Refinitiv Eikon data.

HIGHLIGHTS

● US refining margins halved, Asian diesel cracks slashed.

● Refineries struggle to recover after demand collapse.

● Refiners to keep runs low, some plants to shut.

European diesel margins hit an all-time low of $2.9 a barrel last week, while Asian diesel cracks averaged $4.26 per barrel over Dubai crude in May, compared with an average of $15.49 a barrel for the whole of 2019.

When countries began lockdown measures, refiners boosted output of diesel, used mostly for trucks and industry, given its relative strength compared to gasoline and jet fuel, as people stopped driving their cars and airlines grounded planes.

Many refiners blended unwanted jet fuel into diesel, adding to extra supplies in the market.

In Turkey, the new STAR refinery cut jet fuel production to near zero, said Hedi Grati, a refining analyst at IHS Markit.

As a result, global diesel stocks have swelled. US distillate inventories have risen for nine weeks, reaching 174.3 million barrels in the week to May 29, the highest in a decade.

As more people world returning to their offices and start using cars, the diesel glut is weighing on refineries which now want to meet rising gasoline demand.

US refinery utilization rose to 71.3 percent last week, well below the 91 percent in the same period in 2019.

“Refineries may even have to cut back runs further to get diesel down to where it should be and there’s a big battle refiners are having between gasoline yield and distillate yield,” said Patrick DeHaan, head of petroleum analysis at tracking firm GasBuddy.

With international aviation expected to remain depressed, refiners would continue diverting jet fuel to the diesel pool, further weighing on cracks, Energy Aspect’s Campbell said.


Over 3k flights cancelled across the Middle East after attack on Iran by the US, Israel

Updated 01 March 2026
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Over 3k flights cancelled across the Middle East after attack on Iran by the US, Israel

RIYADH: US and Israeli strikes on Iran led to widespread airspace shutdowns in the Middle East, canceling and rerouting thousands of flights and paralyzing key international travel corridors.

Flight cancellations affected seven airports across the Middle East, including Dubai and Abu Dhabi in the UAE, Doha in Qatar, and Manama in Bahrain.

Emirates Airlines said in a statement: “Due to multiple regional airspace closures, Emirates has temporarily suspended all operations to and from Dubai, up until 1500 hrs UAE time on Monday, 2 March.”

A flydubai spokesperson said the situation is evolving, and the airline is closely monitoring developments while coordinating with authorities to adjust its flight schedule.

“Our teams are working diligently to implement comprehensive welfare for all affected customers. The safety of our passengers and crew remains our highest priority,” the spokesperson said.

He added: “We are currently experiencing a high volume of calls and appreciate our customers’ patience while our teams work to assist everyone as quickly as possible.”

Qatar Airways announced that the airport will remain closed until at least the morning of March 2.

“Qatar Airways flights to, and from, Doha have been temporarily suspended due to the closure of Qatari airspace,” the airline said.

It added: “Qatar Airways will resume operations once the Qatar Civil Aviation Authority announces the safe reopening of Qatari airspace.”

Saudia also said in an official statement that it had canceled a number of flights due to developments in the region and the closure of airspace.

The organization said the decision was taken in line with aviation safety and security standards, noting that its Emergency Coordination Center is closely monitoring developments with relevant authorities.

Saudia urged passengers to verify the status of their flights before heading to the airport and said guests would be notified of updates through the contact details associated with their bookings.

The carrier added that further information would be announced in a subsequent statement if available.

Air Arabia also said its flights were experiencing cancellations, delays, or rerouting as a result of the evolving situation and airspace closures.

Airlines cited airspace closures and safety concerns as the main reasons for flight disruptions, urging passengers to check official channels for updates as the situation develops.

Israeli airspace also remained closed on March 1st. Israeli airline El Al said it was preparing a recovery effort to bring home Israelis stranded abroad once the airspace reopened.

Travelers were either stranded or diverted to other airports on Feb. 28 after Israel, Qatar, Syria, and Iran as well as Iraq, Kuwait and Bahrain, closed their airspace.

After the UAE announced a temporary partial airspace closure, FlightRadar24 recorded no flights over the country.

The closures affected key hub airports in Dubai, Abu Dhabi, and Doha. Emirates, Qatar Airways, and Etihad, airlines that operate from these hubs, normally handle around 90,000 passengers daily, with even more traveling to other Middle Eastern destinations, according to aviation analytics firm Cirium.

Airports hit by attacks

Two airports in the UAE reported incidents as the government there condemned what it called a “blatant attack involving Iranian ballistic missiles” on Feb.28.

Dubai International Airport, the UAE’s largest and one of the world’s busiest, reported four injuries, while Abu Dhabi’s Zayed International Airport said a drone attack killed one person and injured seven others. Strikes were also reported at Kuwait International Airport.

Though Iran did not publicly claim responsibility, the scope of retaliatory strikes that Gulf nations attributed to Iran extended beyond the US bases that it previously said it would target.

Flight delays, cancellations are likely to continue

“For travelers, there’s no way to sugarcoat this,” said Henry Harteveldt, an airline industry analyst and president of Atmosphere Research Group.

“You should prepare for delays or cancellations for the next few days as these attacks evolve and hopefully end,” he added.

To avoid conflict zones, airlines are rerouting Middle East flights over Saudi Arabia, adding hours and fuel costs, which could push ticket prices higher if the tensions persist.

The extra flights will strain air traffic controllers in the Kingdom, who may need to slow traffic for safety. Meanwhile, countries that closed their airspace will lose out on overflight fees from passing airlines.

Mike McCormick, former head of air traffic control at the FAA and now a professor at Embry-Riddle Aeronautical University, said some countries may reopen parts of their airspace in the coming days once US and Israeli officials provide airlines with details on military flight zones and Iran’s missile capabilities.

“Those countries then will be able to go through and say, ok, we can reopen this portion of our space but we’ll keep this portion of our airspace closed,” McCormick said.

“So, I think what we’ll see in the next 24 to 36 hours is how the use of airspace evolves as the kinetic activity gets more well-defined and as the capability of Iran to actually shoot missiles and create additional risk is diminished due to the attacks,” he added.

But it is unclear how long the disruption to flight operations could last. For comparison, the Israeli and US attack on Iran in June 2025 lasted 12 days.