The Australian Institute of Petroleum’s national average diesel price.

A COMBINATION of surging oil demand and a cut in supply from major producing countries has been blamed for diesel prices reaching their highest point this year.

According to the Australian Institute of Petroleum, the national average diesel price finished last week at 215.3c at the bowser and 202.7c at the Brisbane terminal gate – the highest it has been since it surged in October last year.

The Australian Institute of Petroleum’s average terminal gate prices out of Brisbane. Click to enlarge

The global market is one of the main drivers of diesel prices and according to the International Energy Agency it has seen a surge in demand through strong northern hemisphere summer air travel, increased oil use in power generation and surging Chinese petrochemical activity.

The IEA says diesel margins have pushed to six-month highs. According to Reuters, China has increased export quotas for its refiners.

Supply has also fallen sharply with some of the world’s largest oil producing countries cutting their output in recent months, including Russia and Saudia Arabia.

The IEA expects the global oil market to remain undersupplied this year.

“Market balances are set to tighten further into the autumn as Saudi Arabia and Russia extend supply cuts at least through September,” it said in its August report.

It says there is scope for the oil producing countries to increase supply.

“Additional supplies of heavy sour crude would allow refiners to boost activity and help ease product market tensions.”