Name: Nobody’s Talking About This ‘Major Crisis’: Global Diesel Shortage Gets Worse | Paul Sankey
Uploaded: 2026-09-16T01:25:54+00:00
Duration: 2502 s

Speakers

Paul Sankey — Lead Analyst, Sankey Research

Summary

Paul Sankey of Sankey Research warns that global diesel and distillate markets are at historic tank-bottom inventories with no marginal supply, making the energy squeeze highly inflationary. He expects crude oil, diesel, natural gas, and tanker rates to stay elevated or rise into winter, and favors oil equities and refiners while flagging Middle East supply disruptions, China's buying, and Europe's Russian gas cutoff. He also gives a relative long Shell/short Exxon trade around Venezuela legal risk.

Global diesel inventories are at record lows with little marginal supply and strong, price-inelastic demand.
Middle East supply outages, Russia/Ukraine attacks, and Libya force majeure are tightening crude oil.
Paul expects oil, diesel, and European natural gas to stay elevated or rise into winter.
He favors oil equities and refiners, citing high margins and relative outperformance versus the S&P 500.
Tanker rates are at all-time highs due to shipping disruptions, supporting freight/tanker instruments.
He would be long Shell and short ExxonMobil on Venezuela legal and contract dynamics.
The inflation impulse could pressure the Fed and bond markets, though he does not give a clean rates trade.

Ideas

Paul Sankey Lead Analyst, Sankey Research 0:16

Diesel shortage keeps prices rising

Global distillate markets are at historic tank-bottom inventories with essentially no marginal supply. Russia has banned diesel exports, Europe's coming cutoff of Russian gas/LNG adds distillate tightness, harvest demand is mandatory and price-inelastic, and AI/data-center construction plus backup generation is increasing diesel use. Jet fuel demand is also price-inelastic, with prices up sharply but demand still rising. Paul expects distillate prices to stay high or go higher, with another 20-30% upside, especially in a cold winter.

Paul Sankey Lead Analyst, Sankey Research 6:13

Oil stocks outperform broad market

High oil prices are raising oil's share of GDP, which historically correlates with oil-equity performance. Oil is taking margin from other parts of the economy and pushing profits into refining and oil producers. Paul expects oil equities to outperform the S&P 500 for another six to seven weeks.

Paul Sankey Lead Analyst, Sankey Research 7:45

Tanker rates spike on disruptions

Tanker rates are at all-time record highs and spiking to unprecedented levels because Strait of Hormuz and Bab el-Mandeb disruptions force longer routes and competition for high-price oil. Higher freight costs are inflationary and support oil prices; this directly supports tanker shipping/freight instruments such as the Breakwave Tanker Shipping ETF discussed by the host.

Paul Sankey Lead Analyst, Sankey Research 8:32

European gas shortage drives prices

Paul is very bullish natural gas for the next two months because of Europe's structural natural gas shortage heading into winter. Europe is set to stop importing Russian LNG/gas from January 1, 2027, creating a 15 million ton hole, while rearmament and cold-weather demand tighten supplies.

Paul Sankey Lead Analyst, Sankey Research 11:20

Supply shocks keep crude oil rising

Middle East supply disruptions, including the Saudi East-West pipeline outage and restricted Hormuz shipping, plus Russia/Ukraine attacks and Libya force majeure, are tightening crude oil. China remains the key marginal buyer and likely keeps buying due to supply-security concerns, while winter inventory builds add demand. Paul says supply shocks are strong enough to keep oil higher and recommends long oil from here through December 5.

Paul Sankey Lead Analyst, Sankey Research 22:15

Long Shell, short Exxon legal risk

In the Venezuela oil agreement prediction market, Shell is the most likely major to sign; Exxon and ConocoPhillips have large arbitration claims and Exxon is unlikely to back off its legal position. Paul would be long Shell and short Exxon as a relative trade.

Paul Sankey Lead Analyst, Sankey Research 22:15

Long Shell, short Exxon legal risk

Paul Sankey Lead Analyst, Sankey Research 29:18

Refiners print huge profits

US refiners are running at record ~98% utilization with very high margins; Paul calls the performance phenomenal and says profits will be enormous because refiners stuck with capacity when others exited. He is very bullish on Valero and similar refiners, though an export ban or forced turnaround/accident is a risk.

Nobody’s Talking About This ‘Major Crisis’: Global Diesel Shortage Gets Worse | Paul Sankey

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