Goldman Sachs Sees Diesel Refining Margins Soaring to $63 a Barrel

Key facts

• Goldman Sachs forecasts diesel refining margins to reach $63 per barrel in the U.S. by 2027.
• Margins for European Union refiners are projected to average $49 per barrel.
• Global refining capacity is constrained by refinery damage in the Middle East and Russia.
• Refinery outages are currently 60% higher than the seasonal average.
• Fuel exports from the Persian Gulf are significantly reduced.
• EU climate regulations have led to refinery capacity shutdowns.

Goldman Sachs anticipates a significant increase in diesel refining margins, projecting them to reach $63 per barrel in the United States by 2027 and average $49 per barrel for European Union refiners. This upward revision from previous forecasts of $27 and $19 per barrel, respectively, is attributed to a global diesel shortage exacerbated by refinery damage in the Middle East and Russia, and constrained refining capacity.

Analysts at Goldman Sachs noted that refinery outages are currently 60% above the seasonal average, further tightening already stretched global refining capacity. The situation is compounded by reduced fuel exports from the Persian Gulf, which are running at approximately 40% of pre-war levels. In Europe, the shortage is further complicated by EU climate regulations that have led to the shutdown of refining capacity.

Meanwhile, several Middle Eastern refineries have sustained damage amid conflicts, and Russia has implemented a diesel export ban, which has been extended, due to production squeezes linked to Ukrainian drone attacks. These factors are contributing to record-high refinery margins globally, with the U.S. crack spread recently reaching triple digits for the first time.