Goldman Sachs Forecasts Diesel Refining Margins at $63

Goldman Sachs has doubled its profit forecast for diesel refiners, projecting margins to reach $63 per barrel in the United States by 2027. The bank’s analysts attribute the surge to tightening global refining capacity driven by geopolitical disruptions and structural constraints across key production regions. Rising strikes on refineries in the Middle East and Russia have further constrained already-stretched global refining capacity, pushing refined-products margins to new highs, the note stated. Diesel remains at the epicenter of the rally, they added.

Tight Supplies and Rising Demand

Global diesel stocks are running low due to refinery damage in the Middle East and Russia. Goldman Sachs commodity team data shows refinery outages currently sit 60% above the seasonal average, and the tightness in diesel markets is expected to persist into next year. Fuel exports from the Persian Gulf are operating at roughly 40% of pre-war levels, the analysts noted, compared to an estimated 70-80% for crude oil exports. This disparity highlights how refined product supplies have been hit harder than crude flows.

For European refiners, the situation carries additional complications. EU climate regulations forced energy companies to shut down refining capacity in anticipation of demand destruction that has yet to materialize. The region now faces a structural shortage of processing facilities just as supply disruptions have tightened the market. Several refineries in the Middle East have suffered damage amid the U.S. and Israeli conflict with Iran, further removing capacity from the global market.

Russia has compounded the problem by instituting a diesel export ban because of production constraints from Ukrainian drone attacks. Moscow recently extended the ban on diesel exports through the end of September, removing a significant supplier from international markets. These overlapping factors have created a supply gap that refiners elsewhere are positioned to fill at substantially higher margins.

Record Margins Expected

Goldman now expects U.S. refining margins for diesel to reach $63 per barrel in 2027, up from an earlier forecast of $27 per barrel. For European Union refiners, the margin projection averages $49 per barrel, nearly tripling the previous estimate of $19. Refinery margins are running at record highs across the world as the energy crisis unfolds. In the United States, the crack spread hit three digits for the first time earlier this month, a milestone that shows the exceptional profitability currently available to operators with available capacity.

The revised forecasts represent a significant shift in the bank’s outlook. The doubling of profit expectations reflects both the severity of current supply disruptions and the likelihood that these constraints will persist longer than previously anticipated. Refiners with operational flexibility and access to feedstock stand to benefit most from the dislocation.

For consumers and businesses that rely on diesel fuel, the margin expansion signals continued price pressure at the pump and for industrial transportation costs. The premium reflects not just current tightness but expectations that the structural constraints will take years to resolve as new refinery capacity comes online or existing facilities are repaired. Whether demand destruction eventually materializes in Europe as regulators originally anticipated remains to be seen, but for now, refiners appear positioned to capture historic margins on every barrel they process.