Refined oil price increases far exceed crude oil price increases: Goldman Sachs more than doubles its forecast for US diesel profits.

The global refining market is facing supply contraction pressures, with refined product prices significantly outpacing crude oil price increases, particularly in the diesel market. Goldman Sachs has sharply raised its forecast for diesel crack spreads in Europe and the US, highlighting the continued impact of geopolitical tensions on global refining capacity and refined product trade.

A recent report by Goldman Sachs indicates that unplanned refinery shutdowns globally are 60% higher than seasonal norms. Against the backdrop of constrained refining capacity and continuously declining refined product inventories, Goldman Sachs has raised its 2027 forecast for US diesel crack spreads from $27 to $63 per barrel, and for the EU from $19 to $49, both more than doubling its previous estimates . Diesel crack spreads are a key indicator of refineries' profit margins after processing crude oil; this significant upward revision suggests that Goldman Sachs expects the diesel market to remain tight in the future.

Meanwhile, Russia extended its diesel export ban until September, Brazil's peak agricultural season is approaching, and winter heating demand in the Northern Hemisphere is about to rebound. This combination of supply-side contraction and seasonally stronger demand poses a risk of further tightening in the global diesel market.

In terms of price performance, the increase in refined oil prices has significantly exceeded that of crude oil. Brent crude oil has risen by nearly 50% year-to-date, while European diesel futures have more than doubled during the same period, making diesel the core of this round of price increases in the energy market.

Refinery shutdowns coupled with geopolitical conflicts have delayed the recovery of refined oil supply.

Goldman Sachs points out that unplanned refinery shutdowns globally are currently 60% higher than seasonal norms. Even with some weakening demand, refined product inventories continue to decline, indicating that the supply gap has not yet been effectively filled. The situation in the Middle East has further exacerbated refining pressures: although Persian Gulf crude oil exports have recovered to 70% to 80% of pre-war levels, refined product shipments have only recovered to 40% of pre-war levels.

This means that the recovery of crude oil supply does not equate to a simultaneous recovery in the refined oil market. Refinery damage and transportation disruptions are causing the impact of geopolitical conflict to spread further from the crude oil market to the refined oil market. Goldman Sachs has repeatedly warned of this risk, noting in March that the impact of US-Iran tensions on the refined oil market might be significantly greater than its impact on crude oil itself; earlier this month, the bank further emphasized the drag on market supply caused by damage to Russian energy infrastructure.

Statements from energy giants confirm this trend. Shell CEO Wael Sawan stated that attacks on Russian refineries, along with shipping security risks in the Persian Gulf and the Red Sea, are creating a "triple threat" to the refined petroleum products market. Total Energy CEO Patrick Pouyanne pointed out that while some crude oil shipments can still pass through the Strait of Hormuz, the impact on refined petroleum product shipments is more severe.

With the peak demand season approaching, diesel supply pressure may intensify further.

While supply is contracting, demand is also receiving new support. According to Bloomberg, Brazil's peak agricultural season is about to begin, which will drive up diesel consumption. As the world's second-largest diesel importer, Brazil's rebounding demand will further increase procurement pressure in the international market; meanwhile, heating fuel demand will also seasonally increase as the Northern Hemisphere enters winter.

With limited refining capacity and continuously declining inventories, supply contraction and demand recovery are resonating. Goldman Sachs has therefore significantly raised its 2027 forecast for diesel crack spreads in Europe and the US, believing that unless there is a substantial easing of geopolitical tensions, the global refining capacity shortage will be difficult to resolve quickly, and high diesel crack spreads may become an important feature of the energy market for some time to come.

Risk warning and disclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.