Goldman Sachs Group has stepped up warnings of tightness in global diesel refining driven by wars in the Middle East and between Russia and Ukraine, with the bank more than doubling its forecasts for profits from making diesel.
Industry analysts, including vice president for Commodities Research at Goldman Sachs, Yulia Zhestkova Grigsby and its managing director, Daan Struyven, said in a note that rising strikes on refineries in the Middle East and Russia had further constrained already-stretched global refining capacity, pushing refined-products margins to new highs, with diesel at the epicenter of the crisis.
According to Bloomberg, refinery outages are running 60 percent above seasonal norms, and product stockpiles are falling despite the loss of some demand, they said. The profit from making a barrel of diesel over Brent will average $63 in the US and $49 in the European Union next year, up from earlier forecasts of $27 and $19.
Industry players have continued to lament as the world faces a global fuels crisis, with product prices including gasoline far outpacing gains in crude.
The squeeze is set to worsen after Russia extended an export ban on diesel through September, and demand picks up in Brazil, the world’s second-largest importer. At the same time, the approaching winter in the Northern Hemisphere is set to boost demand for heating fuel.
In the Middle East, Bloomberg reported, while exports of crude oil from the Persian Gulf are likely to have returned to 70 percent to 80 percent of pre-war levels, shipments of products remain at only 40 percent, the Goldman analysts said in the August 28 note.
“A full recovery in runs requires global geopolitical deescalation,” the analysts said.
On futures markets, Brent crude oil has rallied almost 50 percent this year, and last traded near $91 a barrel on a fresh bout of unrest in the Middle East. European gasoil futures, meanwhile, have more than doubled.
Goldman Sachs has frequently flagged tightness in product markets in recent months, saying in March that the Iran-US war was expected to have a far greater impact on fuels than oil. Earlier this month, it again highlighted the impact of Ukrainian attacks on Russian energy infrastructure.
Shell Plc chief executive officer, Wael Sawan said last week the products market was being squeezed by the “triple threat” of attacks on Russian refineries and dangers to shipping in the Persian Gulf and Red Sea. Meanwhile, TotalEnergies SE’s Patrick Pouyanne said while some crude cargoes were transiting the Strait of Hormuz, no refined products were making it out.
