Goldman says diesel prices to stay high through 2027

Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.11% expects diesel prices to stay high through 2027 because refineries are struggling to keep up with demand. Speaking at a conference in London, top oil executives said rebuilding the world's depleted fuel stockpiles could take years. Together, their comments suggest the supply shock from the Iran war, which disrupted Gulf exports through the Strait of Hormuz, will outlast any quick fix from emergency stock releases.cnbc+1

Goldman sees refining squeeze

Goldman forecasts that global diesel and jet-fuel crack spreads, the premium refined fuels earn over crude, will average more than \$40 a barrel in 2027. That is more than twice the usual level of about \$20, even though the bank expects Brent crude to settle near \$80. "We need to keep product prices high enough to have a certain level of demand destruction continuing next year," Nikhil Bhandari, Goldman's co-head of Asia-Pacific natural resources research, told CNBC. He said that if demand rebounds, refineries worldwide may have to run harder than at any point in the past 20 years.cnbc

The bank expects refining capacity outside China to shrink by about 300,000 barrels per day in 2026. It also said fuel inventories could end the year at their lowest days-of-supply level since 2015. Bhandari said about 2 million barrels per day of Middle Eastern refining capacity is still offline, and damage to Russian plants has cut diesel supply further.cnbc

Executives warn of a long recovery

Saudi Aramco CEO Amin Nasser spoke at the Energy Intelligence Forum on Monday, October 5. It was his first conference speech since the war began, Reuters reported. "Until Hormuz fully re-opens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify. Even then, replenishing inventories while meeting demand could take up to two years," he said. According to Reuters, he said 3 billion barrels of supply have been lost since the conflict started, and 1 billion barrels have been drawn from global inventories.spa+1

Shaikh Nawaf Al-Sabah, CEO of Kuwait Petroleum Corporation, said the world is short 6 million barrels per day of refined products. "There is not enough refining capacity in world to make up for shuttered capacity in Middle East Gulf," he said. Petronas CEO Tengku Muhammad Taufik predicted "bedlam for the bulk of the end of the year and maybe 2027." ConocoPhillips Executive Chair Ryan Lance said global demand may not recover until 2028 or 2029.reuters+1

Stock releases offer short-term relief

On Friday, the Group of Seven countries agreed to release 100 million barrels of crude and refined products over four months, with a large share of diesel going out in the first 20 days. European gasoil futures fell after the announcement. Analysts doubted the move would help for long. "Emergency releases only solve a liquidity problem, not the underlying stock problem," said Baden Moore, an analyst at the brokerage CLSA.cnbc