Goldman Sachs raised its forecasts for the average margin on producing a barrel of diesel versus Brent crude next year to 63 dollars in the United States and 49 dollars in the European Union, from 27 dollars and 19 dollars, respectively, warning that wars in the Middle East and between Moscow and Kyiv are tightening global refining capacity, according to a memo that was undated in the material.
Refinery outages squeeze supplies
Bank analysts, including Yulia Gestkova Grigsby and Dan Struyven, said mounting attacks on refineries in the Middle East and Russia had imposed further constraints on global refining capacity, which is already under severe pressure, pushing refined-product margins to new record highs. They stressed that diesel remains at the heart of the rally.
Refinery outage rates are currently 60% above normal seasonal levels, while product inventories are falling despite some easing in demand, the analysts said. Prices for products, including gasoline, are rising at a faster pace than crude-oil prices.
Russian ban and additional demand from Brazil
The bank expects the supply squeeze to worsen after Russia extended its diesel export ban through September, while demand in Brazil, the world's second-largest importer, is rising. The approaching winter in the Northern Hemisphere is also expected to boost demand for heating fuel.
Limited recovery in Middle East product shipments
Goldman Sachs analysts said in a memo dated August 28 that although crude-oil exports from the Persian Gulf could recover to between 70% and 80% of pre-war levels, product shipments remained at just 40%. They added that a full recovery in refinery operating rates would require a global easing of geopolitical tensions.
Wael Sawan, chief executive of Shell, said last week that the product market was under pressure from a triple threat: attacks on Russian refineries and risks facing shipping in the Persian Gulf and the Red Sea.
By contrast, TotalEnergies Chief Executive Patrick Pouyanné said that although some crude-oil shipments had passed through the Strait of Hormuz, no refined-product shipments had exited through it.
