Crude oil has "returned," but refined oil products "haven't," and the global refining deficit is widening.

Crude oil is returning to the market via covert shipping and alternative routes, but the gap in downstream refining capacity cannot be filled by logistics alone . Goldman Sachs has therefore significantly raised its 2027 diesel margin forecast, locking in a long-term trend of "higher and longer" diesel premiums.

In its August 29 report, Goldman Sachs raised its 2027 forecast for U.S. diesel to Brent crude oil yields from $27 per barrel in February to $63 per barrel, and for Europe from $19 per barrel to $49 per barrel, both more than doubling its previous forecasts.

The immediate context for Goldman Sachs' adjustment is that global refined petroleum product exports fell by about 6 million barrels per day (about 25%) year-on-year , with the Persian Gulf contributing 3.2 million barrels per day and Russia 1.1 million barrels per day, accounting for about three-quarters of the global shortfall.

The report points out that Persian Gulf crude oil exports have recovered to 70% to 80% of pre-war levels, while refined product exports have only recovered to about 40% . Goldman Sachs predicts that global refinery utilization rates will not return to normal until the second half of 2027, and the structural shortage of diesel will persist in pricing for a longer period.

Crude oil has "returned," but refined oil products haven't.

Persian Gulf crude oil exports have recovered to 70% to 80% of pre-war levels, while refined oil exports remain at around 40%.

Goldman Sachs estimates that actual crude oil exports from the Persian Gulf are around 15 to 16 million barrels per day, 5 to 6 million barrels per day higher than the low point in March, and significantly higher than real-time tanker tracking data – more and more tankers are turning off their AIS transponders, ship-to-ship transfers are increasing, Iran and Oman are pushing forward with the Hormuz temporary shipping corridor, and Gulf oil-producing countries are also expanding alternative routes that bypass the strait.

The trends of crude oil and refined oil products have thus diverged: global crude oil exports fell by only 10% year-on-year, while diesel, jet fuel, and fuel oil exports fell by 22%, 20%, and 32%, respectively . Prices also diverged – diesel profit margins rose by 225% year-on-year, jet fuel by 234%, while crude oil only saw a 34% increase.

Goldman Sachs believes that the continued increase in "undercurrent" supply and the ongoing alternative routes may limit the upside potential of crude oil prices, even with ongoing supply disruptions in the Middle East.

Global refined petroleum product exports fell by approximately 6 million barrels per day (about 25%) year-on-year, with the Persian Gulf and Russia contributing about three-quarters of the decline. Attacks on Russian refineries have triggered restrictions on gasoline and diesel exports, refineries in the Middle East remain damaged, and shipping routes in the Strait of Hormuz and the Red Sea are also disrupted.

Goldman Sachs believes that crude oil can be diverted, but refineries cannot be moved—this is the biggest difference between this round of shortages and previous crude oil supply shocks.

Refining bottlenecks lock in long-term high profits

Supply-side recovery will take time. Global refinery shutdowns are about 60% higher than seasonal norms, and Goldman Sachs estimates global refining activity is down nearly 7 million barrels per day year-on-year. Spare capacity is scarce.

U.S. refineries are operating near full capacity, while Asian refineries face crude oil supply constraints, with new capacity insufficient to offset ongoing shutdowns. A six-month supply shortage has begun to impact inventories, with U.S. diesel and gasoline inventories down 9% and 7% year-on-year, respectively.

Since February, diesel has accounted for more than 40% of the $40 per barrel increase in global refined product prices, forcing Goldman Sachs to significantly raise its forecasts. Goldman Sachs expects global refinery utilization rates to return to seasonally normal levels only in the second half of 2027, and new capacity additions will not be sufficient to fill the gap.

Furthermore, the report stated that time charter rates from the Persian Gulf to China for May 2027 increased approximately fivefold within a month, indicating that the shipping market has not yet seen a rapid return to normal pricing.

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