Refining Bottleneck to Keep Diesel Prices High Despite Global Crude Surplus

Goldman Sachs has issued a significant upward revision for diesel and jet fuel margin forecasts through 2027, signaling that industrial fuel prices will remain high despite a projected surplus in the global crude oil market.

The investment bank’s updated commodities report, released October 6, 2026, highlights a growing disconnect between the availability of raw crude and the industry’s ability to process it into “middle distillates” like diesel. Goldman Sachs analysts warn that the refining bottleneck will prevent lower costs from reaching the pump.

The Refining Capacity Gap

The primary driver for the sustained high prices is a net reduction in refining capacity outside of China. For the 2026 calendar year, global refining capacity (excluding China) is expected to shrink by a net 300,000 barrels per day.

This capacity loss is creating a structural shortage that allows refiners to charge significantly higher premiums, known as margins, for the fuel they produce. Goldman Sachs revised its 2027 US diesel margin forecast from $27 per barrel to $63 per barrel. European markets face a similar trajectory, with EU diesel margin forecasts more than doubling from $19 per barrel to $49 per barrel.

Demand Trends and Economic Headwinds

The persistence of high margins comes even as consumption shows signs of cooling. Between May and July 2026, global diesel demand fell by 4% year-over-year. Typically, a drop in demand of this magnitude would lead to lower prices; however, the lack of spare refining capacity has effectively neutralized the impact of reduced consumption.

The “refinery gap” is exacerbated by geopolitical disruptions and industrial shifts. Recent six-month logistics constraints in the Strait of Hormuz and refinery strikes in key regions have further tightened the supply of finished products. For industrial diesel users and the transport sector, this suggests that the cost of fuel will remain detached from the price of crude oil for the foreseeable future.

Analysts suggest this environment creates a bifurcated market: a “well-supplied” crude market alongside a “scarce” refined product market. While gasoline supply has remained relatively stable, the focus on middle distillates indicates that the sectors most reliant on diesel—logistics, construction, and manufacturing—will continue to face elevated operational costs through the end of 2027.

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