Diesel prices are expected to rise in 2025 after months of low levels, as several refineries in developed countries are set to shut down, according to analysts and traders who spoke with Reuters.
After peaking in November, refining margins for diesel have fallen over the past two weeks across key markets, including the U.S., Europe, and Asia.
Next year, around 1 million barrels per day (bpd) of refining capacity in Europe and the U.S. is expected to close permanently. However, China, India, and Indonesia are expected to add roughly 800,000 bpd of new refining capacity, Reuters calculations show. Notable refineries scheduled for closure include the Grangemouth refinery in Scotland, which is the only crude processing facility in the region and is set to shut by mid-2025, along with LyondellBasell’s Houston refinery and the Phillips 66 refinery in Los Angeles, both of which will close by the end of next year.
The closures in Europe and the U.S. could tighten diesel supply, potentially boosting refining margins in 2025. Analysts also expect diesel demand to rise compared to current levels.
“We are positive on European diesel prices for 2025 due to refinery closures, low forward margins that will keep utilization rates low, and a small rebound in demand,” said Natalia Losada, an analyst at Energy Aspects.
In Asia, diesel demand in India and surrounding regions could recover in 2025, but China may dampen global demand. Analysts cite a structural shift in fuel demand in China, driven by the rise of electric vehicles (EVs) and LNG-powered trucks.
Daimler Truck, a major truck manufacturer, recently reported a “catastrophic market” in China, signaling weak demand in the country. Earlier in 2024, the research division of China National Petroleum Corporation (CNPC) predicted that transportation fuel demand in China could peak before the end of the year.
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