Report Overview - The report analyzes the reasons behind the significant fluctuations in European diesel prices since June 2025, predicts future price trends and driving factors, and discusses potential impacts of policy changes and unexpected events on the market [1]. 1. Report Industry Investment Rating - Not provided in the report. 2. Core Viewpoints - The significant fluctuations in European diesel prices are mainly driven by changes in supply and demand. In the short - term, prices may face downward pressure due to increased production in Europe and restored external supply. However, in the long - term, the market remains uncertain due to factors such as limited production growth potential, a fragile supply chain, sanctions, and unexpected events [20][34]. 3. Summary by Directory 3.1 Fluctuation Starting Point: Reasons for the Sharp Rise in European Diesel - **Supply - side**: After the Russia - Ukraine war, European refineries shifted to lighter crude oil, squeezing the middle distillate yield. In 2023 - 2024, refineries further tilted the yield towards gasoline, reducing diesel production. Western Europe's diesel import dependence is about 35%, with some countries exceeding 50%, and over 90% of imports come from the US, the Middle East, and India [3][4]. - **Demand - side**: In the short - term, the change in ship - fuel demand in the Mediterranean region and increased diesel demand in other regions are driving factors. After the sulfur emission control in the Mediterranean on May 1, 2025, the demand for low - sulfur diesel increased. In addition, Egypt's increased diesel imports and India's stable domestic demand also contributed to the tight supply in Europe [12][13]. 3.2 Future Market Trends - **European production recovery and external supply restoration**: Rising diesel prices have led to a recovery in European refining profits and an increase in refinery operating rates. However, the growth of gasoline production may limit the increase in diesel production. Externally, the US may increase diesel production, and the supply from the Middle East and the US to Europe is rising. Overall, European diesel prices may face downward pressure, but unexpected events could interrupt the supply recovery process [14][20]. - **Impact on the Asian market**: The rise in European diesel prices has attracted Middle Eastern and Indian diesel, pushing up Asian diesel prices. China and South Korea's export volumes will affect Asian supply. Overall, there is no significant supply growth pressure in Asia [27][28]. - **Future market outlook**: The European diesel crack spread may continue to decline as supply eases, and the Asian crack spread may follow. However, the downward space is narrowing due to limited production growth and a fragile supply chain. The market remains uncertain in the medium - to - long - term [34]. 3.3 Future Contradictions in the European Diesel Market - **EU's new sanctions and their impact on diesel logistics**: The 18th round of EU sanctions on Russia may reshape the diesel trade flow. India and Turkey are the most affected. India may face difficulties in adjusting its export sources, and Turkey may struggle to find alternative sources. This could lead to changes in the European diesel supply structure [35][37]. - **Russian diesel production and export prospects**: Russia's refinery operating rate is currently low, but supply is expected to increase. However, potential US sanctions could reduce Russia's diesel exports [41][42]. - **Impact of uncontrollable factors on diesel**: Weather conditions such as hurricanes, cold snaps, and low river levels can affect refinery production and oil transportation. Geopolitical conflicts may disrupt refinery operations and oil exports. Changes in the natural gas market can also impact diesel supply and demand [46][47].