Goldman Doubles Diesel Margin Forecast to $63 as Refinery Outages Bite

Global diesel markets face sustained tightness as Goldman Sachs more than doubles its 2027 crack spread forecasts for the US and Europe.

Goldman Sachs more than doubled its 2027 diesel crack spread forecasts to $63 per barrel in the US and $49 in Europe, as refinery outages run 60 percent above seasonal norms and Persian Gulf product exports remain at 40 percent of pre-war levels.

"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," Goldman's commodity analysts wrote in a note. "Diesel remains at the epicenter of the rally."

The revised forecasts compare with $27 per barrel for US refiners and $19 for EU refiners projected in February, before the Iran war began. Global refinery unplanned outages are running 60 percent above the seasonal average, while Persian Gulf product exports have recovered to only 40 percent of pre-war levels — compared with 70 to 80 percent for crude oil exports.

The tightness extends into next year, with Russia extending its diesel export ban to September and seasonal demand from Brazil's agricultural peak and northern hemisphere winter heating approaching. Brent crude has gained nearly 50 percent year-to-date, while European diesel futures have more than doubled, making diesel the core of this energy rally.

The supply-demand imbalance traces to a combination of geopolitical shocks. Iran's blockade of the Strait of Hormuz — which previously carried a fifth of the world's seaborne oil and gas exports — has reduced crude feedstock for Gulf refineries. Iranian drone and missile attacks have also damaged key processing facilities, including Kuwait's Mina Abdullah and Mina al-Ahmadi refineries and Saudi Aramco's Abqaiq complex. Ukrainian strikes on Russian refineries have hammered output from a country that previously supplied a tenth of global diesel.

Shell Chief Executive Wael Sawan described the situation as a "triple threat" to refined product markets, citing Russian refinery attacks and shipping security risks in the Persian Gulf and Red Sea. TotalEnergies Chief Executive Patrick Pouyanne noted that while some crude cargoes still transit the Strait of Hormuz, refined product shipments face more severe disruption.

The demand side is tightening as well. Brazil, the world's second-largest diesel importer, is entering its agricultural peak season, while northern hemisphere winter heating demand approaches. Global refined product exports have slumped 25 percent year-on-year, according to Goldman's data.

UK Refining Collapse Exposes Import Dependence

Britain illustrates the structural fragility. The number of operating refineries in the UK has fallen from nine to four since 2000, with Scotland's Grangemouth refinery stopping processing in April 2025 and the Lindsey refinery in Lincolnshire shuttered last August. UK diesel pump prices have risen 41.1 pence per litre since late February to 183.5 pence, hitting drivers, manufacturers, and farmers who rely on red diesel.

The UK's shrinking refining base means the country increasingly depends on imports at a time when global product supply is contracting. EU climate regulations have similarly forced energy companies to shut down refining capacity in anticipation of demand destruction that has yet to materialize, leaving the bloc structurally short of diesel.

What Happens Next

Goldman warned prices could climb further if refinery attacks and shipping costs do not ease. The bank's analysts said the tightness in diesel will extend into next year, with elevated crack spreads becoming a defining feature of the energy market as long as geopolitical tensions persist. US crack spreads have already hit triple digits for the first time on record this month.

For integrated oil companies and independent refiners, the margin expansion translates directly into higher earnings. Shell, TotalEnergies, Valero, and Marathon Petroleum stand to benefit from the sustained spread between crude and refined products. For consumers and downstream industries, however, the elevated margins mean higher fuel costs that could feed into inflation expectations and influence central bank policy decisions.

This article is for informational purposes only and does not constitute investment advice.