Goldman Sachs has forecast that diesel prices will need to stay high through 2027 as refinery constraints continue to struggle against recovering consumption and inventory rebuilding efforts, according to remarks made during CNBC's Squawk Box Asia program on Monday, October 6, 2026. Nikhil Bhandari, Goldman's co-head of Asia-Pacific natural resources research, emphasized the necessity of maintaining elevated product prices to manage demand destruction through the recovery period. The bank views high diesel prices as essential to prevent surging demand from overwhelming already constrained refining capacity.
Goldman projects global diesel and jet-fuel crack spreads—the premium refined products command over crude oil—will average above 40 dollars per barrel in 2027, more than double their typical level of approximately 20 dollars per barrel. The forecast assumes Brent crude will stabilize at around 80 dollars per barrel as crude flows through the Strait of Hormuz gradually normalize. Bhandari stated that any demand recovery in 2027 would require the global refining system to operate at its highest utilization rate seen over the past two decades.
The outlook reflects significant challenges in the refining sector, including negative refining capacity growth expected during 2026, with refining capacity outside China forecast to contract by roughly 300,000 barrels per day. Goldman's analysis indicates that product inventories could end 2026 below the lowest days-of-supply level recorded since 2015, according to the bank's Refining Super Cycle report published September 21. The supply constraints are further exacerbated by approximately 2 million barrels per day of Middle Eastern refining capacity remaining offline and damaged Russian facilities restricting diesel supply.
Baden Moore, resources and energy research analyst at brokerage CLSA, notes that recent market weakness does not necessarily represent permanently destroyed demand. He indicates that underlying oil-product demand remains largely intact, with market balancing occurring through inventory management, reserve drawdowns, consumption curtailment and refinery optimization. Moore estimates that replenishing global inventories while meeting demand could require up to two years.
U.S. refineries operating at elevated rates to compensate for falling global capacity face additional headwinds from deferred maintenance requirements that will temporarily reduce refinery runs. Additionally, recovery of Gulf crude exports is not expected to substantially improve refined product availability, as shipments of diesel, gasoline and jet fuel remain restricted. The Group of Seven countries announced Friday an agreement to release 100 million barrels of crude and refined products over four months, including a substantial front-loaded diesel release within the first 20 days.
The announcement prompted European gasoil futures to decline 5.75 percent, though market experts express limited optimism regarding long-term pricing impact. Saudi Aramco CEO Amin Nasser remarked that emergency reserves might provide temporary relief but cannot address fundamental supply constraints, stating such measures represent only a liquidity solution. CLSA's Moore echoed this assessment, noting that emergency releases consume existing inventories rather than rebuild them, shifting the longer-term demand source to restocking efforts.
Bernard Aw, chief economist for Asia-Pacific at Coface, characterized the impact of such releases as temporary rather than structural.
Source: cnbc.com