Goldman Sachs identifies a significant diesel supply squeeze, driven by refinery outages in the Middle East and Russia, leading to record-high refining margins despite volatile crude oil prices.
The tightening diesel market and record refining margins indicate potential for higher fuel prices for consumers and businesses, impacting transportation costs and broader economic activity. This situation highlights the vulnerability of global energy supply chains to geopolitical events and refinery disruptions.
Goldman Sachs has identified a significant diesel supply squeeze as the primary threat in oil markets, citing the lowest global refining activity for this time of year since the 2020 pandemic. The investment bank noted that war-induced refinery outages in the Middle East and Russia have severely impacted global fuel supply, particularly diesel.
According to Goldman's commodity analysts, increased output in the Americas and Africa has only managed to offset about a third of the lost supply. In July, global refining throughput slumped by as much as 6.5 million barrels per day compared to July 2025, with lower Chinese run rates and the aforementioned outages slashing fuel supply. Specifically for diesel, global exports have dropped by an estimated 35%, or 2.6 million barrels per day, in July.
The investment bank stated that middle distillate markets continue to tighten, with inventories falling below the seasonal average. This situation sets the stage for even tighter markets if supply is further constrained. Despite extreme volatility in crude oil markets over the past five months, the refined product market has tightened, pushing refining margins to record highs. This is attributed to the fact that the supply of petroleum products is considerably tighter than crude supply.
Fatih Birol, the executive director of the International Energy Agency (IEA), commented that refinery activity and product supplies have not kept pace with crude deliveries, indicating that markets for refined oil products, including diesel and gasoline, are significantly tighter than those for crude.