On Wednesday Bloomberg reported that Europe’s diesel inventories will drop to the lowest levels in nearly 12 years, according to the latest outlook from Wood Mackenzie.

The UK Consultancy’s analysts believe the stocks will be filled by December and January, however a sharp drop-off will then plunge stocks to the lowest on record for any month going back to 2011.

In February, the EU will cease receiving nearly all seaborne shipments of petroleum products, including diesel-type fuel, from its largest supplier as the latest round of sanctions from the EU against Russia go into effect. Those Russian supplies are crucial as a cushion against supply disruptions, and their loss will greatly enhance volatility in the fuel market.

James Burleigh, a principal analyst at Wood Mackenzie notes the lower diesel inventories have driven prices higher, incentivizing European refineries to run hard.

He added, “We expect the higher production to continue to be supported by the strong net cash margins, and expect gasoil/diesel stocks at end-December to have built almost three million barrels.” He also predicted daily crude processing by northwest Europe would increase by 420,000 barrels in November, bringing the total to 6.14 million barrels per day.

Part of the problem with diesel availability in both Europe and the Unites States lies in the fact the futures markets are backwardated, making prompt supplies more expensive than later deliveries. As a result, fuel is sold immediately, since stockpiling is less profitable.

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