Goldman Sachs Oil Analysts: Product Margins to Stay Higher for Longer on More Outages and Lower Inventories
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Goldman Sachs argues refined product margins will stay higher for longer as refinery outages in the Middle East and Russia tighten an already stretched global system and inventories drain. Diesel is the epicenter, contributing over 40% of the US$40/bbl rise in global wholesale product prices since late February, with diesel and jet margins still triple year-ago levels while dated Brent is up just 34%. Six months of short supply have cut US diesel and gasoline inventories 9%/7% YoY (-11 and -15 million barrels), with visible diesel stocks in Northwest Europe, Fujairah, China and Singapore down about 10%. A record risk premium—August US/European diesel margins nearly US$40/bbl above spot fundamentals—amplifies the squeeze. Assuming Middle East unplanned outages ease gradually by mid-2027 while Russian outages persist, global runs regain seasonal normality only in 2H27; annual capacity additions of 0.4-0.5mb/d cannot offset the losses. Goldman forecasts 2027 US/Europe diesel margins averaging US$63/US$49 per barrel, slightly above forwards, and 4Q26 at US$75/US$65. Upside could lift US diesel above US$80 in 2027; even a bear case reaches US$40/US$30 by end-2027. It recommends hedging geopolitical risk via deferred European diesel time spreads and staying long Dec26-Mar27 European gasoil time spreads.