Goldman Sachs has indicated that diesel prices may need to remain elevated through 2027 as refinery constraints struggle to keep pace with recovering consumption from governments and companies looking to rebuild their inventories. Nikhil Bhandari, co-head of Asia-Pacific natural resources research at Goldman, emphasized the necessity of maintaining high product prices to manage demand destruction.
The bank forecasts that global diesel and jet-fuel crack spreads will average above $40 per barrel in 2027, more than double the typical level of around $20, despite expectations for Brent crude to stabilize at approximately $80 per barrel. Bhandari noted that if demand rebounds next year, the global refining system will need to operate at its highest utilization rates in two decades.
CLSA's Baden Moore added that recent demand weakness does not indicate a permanent decline, as buyers are managing the market through inventory adjustments and refinery optimization.
However, Goldman warns that recovering demand could clash with a strained refinery network, predicting negative refining capacity growth in 2026 and a potential drop in product inventories to their lowest levels since 2015. The situation is exacerbated by approximately 2 million barrels per day of Middle Eastern refining capacity being offline and ongoing issues with Russian facilities.
Although the Group of Seven countries recently agreed to release 100 million barrels of crude and refined products, experts remain skeptical about the long-term impact on supply and prices, suggesting that such emergency measures only address immediate liquidity issues rather than the underlying supply challenges