The cost of diesel is plunging around the world as traders weigh the impact of a potential new quota for Chinese fuel exports.

Europe’s ICE gasoil crack, which measures the price of diesel futures relative to crude oil contracts, plummeted to its lowest in more than a month earlier on Wednesday. Margins for diesel-type fuel also fell sharply in the US and Singapore.

China’s Ministry of Commerce may issue a fuel export quota of 1.5 million tons in a fourth batch allocation, industry consultant OilChem earlier said. It is unclear how much of this fuel quota would be diesel.

Diesel is regularly shipped around the world on oil tankers, so higher supply and any subsequently weaker prices in one region affects other markets. Even though margins have tumbled, they remain elevated by historical standards. In Europe, the ICE gasoil crack stood at about $35 a barrel shortly after 1pm in London, roughly triple the five-year seasonal average.

A potential export quota of 1.5 million tons would equate to about 11.2 million barrels, if it were all diesel. This year, the world’s daily demand for diesel-type fuel is pegged at a little over 28 million barrels a day by the International Energy Agency. 

China’s gross exports of diesel, gasoline and kerosene have trailed year-ago levels by about 580,000 barrels a day so far this year, the IEA said. 

The agency revised down its expectation for this year’s Chinese refinery runs in its monthly oil market report on Wednesday, and also expects an annual drop in the country’s overall demand. The predicted annual decline in refinery throughputs is “unprecedented,” and the consequent lack of supply was expected to be made up by lower product exports. 

Along with potential Chinese supplies, the diesel market is also facing demand-side pressures.

“In Europe there is the potential for energy rationing in the winter which will also impact commuting and industry, key demand sectors for diesel,” said Jonathan Leitch, an oil analyst at Turner, Mason & Co. “There are also worries that high inflation with rising interest rates will be recessionary, cutting industrial output and therefore the demand.”