Diesel Prices Expected to Stay High Through 2027 Due to Refinery Constraints

Goldman Sachs predicts that diesel prices will remain elevated through 2027 due to ongoing refinery constraints and recovering demand. The bank's co-head of Asia-Pacific natural resources research, Nikhil Bhandari, emphasized the need to maintain high product prices to manage demand destruction in 2027. Goldman forecasts that global diesel and jet-fuel crack spreads will average above $40 per barrel in 2027, more than double the usual level, despite Brent crude stabilizing around $80 per barrel.

Bhandari noted that the global refining system may need to operate at the highest utilization rate in two decades if demand rebounds. CLSA's Baden Moore, however, believes underlying oil-product demand remains intact, with buyers balancing the market through inventory management and consumption curtailment. Replenishing global inventories while meeting demand could take up to two years, according to Moore.

The recovery of refined product demand faces challenges from a strained refinery network. Goldman expects 2026 to see negative refining capacity growth, with Middle Eastern and Russian facilities offline, and U.S. refineries needing deferred maintenance. The Group of Seven's recent agreement to release 100 million barrels of crude and refined products over four months has had only a temporary impact on prices, as experts believe the additional supply will not significantly improve long-term refined product availability.

Saudi Aramco CEO Amin Nasser and CLSA's Moore both noted that emergency reserves can provide short-term relief but do not address the underlying supply issues. Coface's Bernard Aw agreed, stating that the impact of such releases is temporary rather than structural.