Goldman: Diesel prices set to stay high through 2027 as refineries struggle to meet demand

• Global refining capacity outside China is expected to contract by 300,000 barrels per day in 2026, with roughly 2 million barrels per day of Middle Eastern capacity remaining offline
• Product inventories could end 2026 below the lowest days-of-supply level recorded since 2015, with replenishment taking up to two years while meeting ongoing demand
• The G7's emergency diesel release announcement may provide short-term relief but experts say it only addresses liquidity issues rather than fixing structural supply constraints

Summary: Goldman Sachs Forecasts Elevated Diesel Prices Through 2027

Key Findings:

Goldman Sachs predicts diesel prices must remain elevated through 2027 to suppress demand as global refinery capacity struggles to meet recovering consumption and inventory rebuilding needs.

Critical Data Points:

• Global diesel and jet-fuel crack spreads forecast to average above $40 per barrel in 2027—more than double the typical $20 level
• Brent crude expected to stabilize around $80 per barrel
• 2026 refining capacity outside China projected to contract by approximately 300,000 barrels per day
• Roughly 2 million barrels per day of Middle Eastern refining capacity remains offline
• Product inventories could end 2026 at lowest days-of-supply levels since 2015

Market Context:

Refinery constraints stem from multiple factors: damaged Russian facilities, offline Middle Eastern capacity, and U.S. refineries requiring deferred maintenance after running at elevated rates. Goldman expects 2026 to mark another year of "negative refining capacity growth." The bank warns that 2026 could see the "highest utilization rate in two decades" if demand rebounds.

Policy Response:

The G7 nations announced crude and refined product releases over four months, including substantial diesel releases within 20 days. This announcement triggered a 5.75% decline in crude prices. However, analysts remain skeptical about long-term impact.

Expert Assessment:

Industry experts characterize emergency reserve releases as temporary liquidity solutions that don't address underlying structural supply problems. CLSA's Moore notes that inventory replenishment while meeting demand could require up to two years, with releases delaying rather than solving the fundamental restocking challenge.