The diesel market in Europe will likely face tough challenges in the summer due to the recent geopolitical developments in Eastern Europe exacerbated by the Russian sanctions.

The situation is prompting traders to seek diesel supplies from Asia and the Middle East, but is there enough refining capacity in the East to mitigate this impact?

Diesel suppliers in Asia are already struggling to keep up with increasing domestic requirements. This has pushed refiners’ diesel profitability to the highest it has been for years. Prolonged economic shutdowns and a lack of real demand over the past couple of years have led to a reduction in the West’s refining capacity. Asia, on the other hand, has spare refining capacity thanks to recent additions to its refining sector. But how much of the needed relief over the summer will this Asian refining capacity really bring?

Let’s look at the main refining centers in Asia. The largest, which is in China, according to S&P Global “is expected to hit a capacity of 937 million mt/year, or 18.81 million b/d, overtaking the US to become the world’s top refiner in 2022.”

However, owing to the lingering effects of COVID-19 lockdowns and planned maintenance, so far there is still weak domestic demand in this quarter that is keeping most of the spare capacity inactive and delaying the start of production of two new refineries.

That said, if export margins remain strong, and after any planned maintenance is completed, refiners may consider increasing both refinery operations and exports as they still have large unused export quotas.

In South Korea and Taiwan, the picture is very different as refinery intake rose in the first two weeks of May, up nearly 10 percent from April, suggesting that refiners are already increasing supplies. Further, in the same two weeks of May, total diesel exports from the two countries increased by around 15 percent compared to April, with the Philippines, Australia and Vietnam also exporting cargoes to the West.

India, which exports more than half of its diesel to the West, has maximized its refineries’ utilization rates and kept them running at near-capacity levels.

Data from the first two weeks of May show that India’s diesel exports are recovering, with more cargoes going to Africa and Brazil than to Europe; however, aside from making refinery output adjustments, India has little or no excess refining capacity with which to boost its diesel exports, particularly to Europe, which also carries issues relating to freight rates and other economic factors.

The Middle Eastern refineries should find themselves reaping the benefits of the current situation in the diesel markets. Geographical proximity as well as sufficient refining capacity in the region will provide enough reasons to persuade refiners to maximize diesel exports to Europe.

As we head into the summer and global economies continue to reopen, years of pent-up demand due COVID-19 frustration plus the usual summer driving season in the US are projected to drive a surge in demand for petroleum products.

Demand for diesel is expected to accelerate in the coming weeks, encouraging refiners to maximize diesel output at the expense of other cleaner products pending developments on the gasoline front over the next few months.

What is clear is that refining capacity globally will become fully stretched before long, leaving no room for mistakes. Further unexpected shutdowns in the global refining system will take refinery margins even higher. That may be good news for the refineries but will be a source of concern for an average household especially in Europe.

• Hassan M. Balfakeih is an oil demand specialist and former chief oil demand analyst at OPEC Secretariat.