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

Global diesel refining margins are projected to soar to $63 per barrel, according to Goldman Sachs, a stark increase from earlier forecasts. The bank attributes this surge to a global diesel shortage caused by refinery damage in the Middle East and Russia. Goldman's analysts explained that rising strikes in Middle Eastern and Russian refineries have further strained already limited global refining capacity.

They cited a 60% surge in refinery outages compared to seasonal averages, with diesel supply tightness expected to persist through next year. The Persian Gulf's fuel exports are currently at 40% of pre-war levels, a fraction of crude oil exports estimated at 70-80%. As a result, refining margins for diesel are now anticipated to reach $63 per barrel in the U.S. and $49 per barrel in the EU in 2027, up from initial forecasts of $27 and $19 per barrel, respectively.

The situation in Europe is further complicated by a shortage of refineries due to EU climate regulations that forced the shutdown of certain refining capacity. Meanwhile, several refineries in the Middle East have been damaged during the U.S.-Israel conflict with Iran, and Russia has imposed a diesel export ban due to production losses caused by Ukrainian drone attacks.

The ban is expected to remain in place until the end of September. Record-high refinery margins are being reported worldwide as the energy crisis unfolds, with the U.S. crack spread hitting triple digits for the first time earlier this month.