Goldman Sachs Warns: Diesel Prices May Remain Elevated Until 2027

Recently, Goldman Sachs warned that diesel prices may remain elevated through the end of 2027, affected by limited refining capacity across countries combined with a recovery in demand driven by government and corporate restocking. Nikhil Bhandari, co-head of Asia-Pacific natural resources research at Goldman Sachs, said publicly: "We need to keep refined product prices high enough to sustain a certain degree of demand destruction through next year." The bank believes that against the backdrop of persistently constrained refining capacity, global diesel prices must remain high to prevent recovering demand from exceeding refineries' capacity load. Although the bank expects Brent crude prices to stabilize around $80 per barrel as crude oil transportation through the Strait of Hormuz is expected to gradually return to normal in the near term, weak refining capacity will continue to cap diesel prices. Goldman Sachs forecasts that the average global diesel and jet fuel crack spread will exceed $40 per barrel in 2027, more than double the conventional level of the past. Bhandari expects: "If demand rebounds next year, the global refining system may reach its highest utilization rate in the past two decades."