US exports 1.5 million barrels daily of distillates... Why does it need Russian diesel? By: Tariq Jaafar Al-Wazan, Oil and Economic Affairs Researcher

The US-Russian understandings announced on October 9, 2026, regarding diesel supplies reveal an economic paradox. US exports of oil distillates averaged 1.56 million barrels per day in the second quarter of 2026, while diesel exports reached approximately 1.6 million barrels per day in August, according to a Reuters report. Nevertheless, Washington is seeking Russian supplies to alleviate domestic price pressures.

The explanation for this paradox does not lie in total oil production, but rather in the availability of deliverable diesel, the distribution of refineries and inventories, transportation costs, and sanctions.

Global supply imbalance

Global demand for diesel and gasoil is estimated at around 30 million barrels per day, based on their approximate share of oil consumption. In August 2026, net exports of diesel and gasoil from the Gulf and Russia combined fell by approximately 1.6 million barrels per day compared to February, according to the International Energy Agency.

This decline represents more than 5% of estimated global demand, but it does not imply an equivalent loss in global production, as other refineries and markets compensated for part of the supply by increasing output and rerouting shipments.

The comparison highlights the pressure on international trade: the drop in exports from these two regions is roughly equivalent to total US diesel exports in August, although the nature of the flows and receiving markets differs.

The Gulf... crude recovery is not enough

Kuwait has a design refining capacity of approximately 1.415 million barrels per day, including 615,000 barrels per day for the Zour refinery, while the UAE’s Ruwais complex has a capacity of around 922,000 barrels per day. These figures refer to crude processing capacity, not diesel production alone.

Despite these investments, net Gulf exports of diesel and gasoil fell to approximately 390,000 barrels per day in August, slightly more than a quarter of pre-disruption levels.

According to shipment-tracking data, Gulf crude and condensate exports recovered to about 91% of pre-war levels in September, compared to 60% for refined products. This gap reflects ongoing constraints on refinery operations and product exports, even as crude flows improved.

Russia... lost production or rerouted trade?

Ukrainian attacks on Russian refining facilities disrupted some production capacity, while sanctions and restrictions on financing and shipping increased trade costs and altered export destinations.

The distinction here is crucial: a refinery shutdown reduces actual production, whereas rerouting a shipment from one buyer to another does not necessarily reduce global supply.

Therefore, the 1.6 million barrel-per-day decline in Gulf and Russian exports cannot be considered an equivalent net shortfall in diesel production, nor can it be entirely attributed to sanctions.

Inventories...

Where has the pressure shifted? Data from the International Energy Agency indicate that global observed oil inventories declined by approximately 507 million barrels between February and August 2026, a figure that includes crude oil and refined products, not diesel alone. In the United States, distillate inventories stood at 105.1 million barrels in the week ending October 2, a drop of nearly 16.4 million barrels compared to the same period last year. As inventories shrink, prices become more sensitive to refinery outages and shipment delays, driving up diesel refining margins and the cost of securing immediate supply.

Why is the United States both exporting and importing? A significant portion of U.S. refining capacity is located on the Gulf Coast, while other markets, particularly the East Coast, require seaborne imports to cover part of their consumption. When international prices rise, Gulf Coast refineries benefit from exports, whereas importing diesel to the East Coast may become cheaper than transporting it domestically due to distance, shipping costs, and the requirements of the Jones Act, which regulates maritime transport between U.S. ports. Consequently, supply security is determined not only by national surplus but also by the marginal price per barrel and the cost of delivering it to the consumer.

The Russian agreement... what is the actual incremental volume? The announced Russian supplies include more than 300,000 tons initially, 500,000 tons in November, and 1 million tons later, plus an additional 3 million tons conditional on Russian refinery capacity. The first three quantities amount to approximately 13.5 million barrels, while the total potential volume reaches roughly 36 million barrels, using an approximate conversion factor of 7.5 barrels per ton. These are announced quantities, not confirmed deliveries, and not all are necessarily destined for the United States. The viability of the agreement depends on whether Russia will increase actual production by restoring idle refineries or simply redirect existing exports from other buyers. In the former case, global supplies rise; in the latter, distribution shifts without a corresponding increase in production. On October 9, the U.S. Department of Treasury issued General License 135, which eased specific restrictions on Russian diesel transactions without constituting a comprehensive repeal of sanctions.

Conclusion: The 2026 crisis demonstrates that the diesel market is not governed solely by crude abundance. The decline in exports from the Gulf and Russia by approximately 1.6 million barrels per day coincided with falling inventories and rising transportation costs, while the United States continued to export and seek additional imports. U.S.-Russian understandings also reveal disparities in the ability to withstand and adjust to sanctions. While the European Union continues to restrict imports of Russian products, Washington widened the margin for dealing with Russian diesel as domestic price pressures intensified, albeit with other restrictions remaining in place. The true test of the agreement is not the volume of announced shipments, but the amount of additional production it brings to the market. Energy security is not measured by the number of barrels produced, but by the economy’s ability to convert them into available fuel and deliver them to consumers at an affordable cost.