Goldman Sachs expects refined-product margins to stay elevated for longer

Overview

This report focuses on the trajectory of global refined-product margins after the Hormuz-related disruption. Goldman Sachs believes that although moving forward the assumption for Persian Gulf export recovery leads to a slight cut in diesel margin forecasts, refined-product supply is still constrained by low inventories, refinery maintenance, attacks on Russian refineries, and delays in global refining-capacity expansion, so diesel and gasoline margins should remain elevated from H2 2026 to 2027.

Core views

The core view is that refined-product margins offer a better risk-reward profile than crude oil prices. In the short term, U.S. gasoline and diesel inventories are low; over the past few months refineries have prioritized diesel and jet fuel output, leaving gasoline supply tight; and about 1.3 million bpd of unplanned refining outages in the Persian Gulf will take months to repair. In the medium term, delayed capacity additions in China and India, ongoing disruptions at Russian refineries, and global refinery utilization near historical highs will provide structural support for 2027 margins.

Analysis framework

The report uses a supply-demand and inventory framework, refinery run-rate and outage tracking, regional crack spread forecasts, and scenario analysis to assess the relative risk of diesel, gasoline, and Brent crude. The analysis focuses on the asymmetry of upside and downside for refined-product margins versus Brent crude under the base case, downside case, and a prolonged Hormuz disruption upside case.

Methodology notes

• Commodity supply-demand analysisRefined-product inventory and refining-capacity constraint framework

  Uses inventory levels, unplanned refinery outages, refining-capacity expansion, and the pace of demand recovery to assess margin persistence.

  When inventories are below the seasonal range and the refinery system is tight, diesel and gasoline margins can stay elevated even if crude prices fall because refined-product supply is constrained.

• Scenario analysisHormuz disruption and demand-recovery scenarios

  Compares different price paths under rapid Persian Gulf export recovery, more persistent demand losses, and Hormuz disruptions that extend into 2027.

  This method is used to assess the upside and downside asymmetry of refined-product margins relative to Brent crude.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Diesel crack spread

  Core beneficiary asset and primary focus

  Strengths

  Low inventories, refinery disruptions, and constrained middle-distillate supply provide support; upside leverage could be significant in a prolonged Hormuz disruption scenario.

  Weaknesses

  If Persian Gulf exports recover faster, demand losses persist longer, or refinery restarts are quicker than expected, margins could retreat.

  Comparison

  The report says diesel margins face less downside risk than Brent crude prices and could show stronger leverage in the upside scenario.

  Risks

  Demand recovery falls short of expectations, refining capacity comes on stream faster than expected, inventories rebuild quickly.

• Gasoline crack spread

  Important component of refined-product margins

  Strengths

  U.S. gasoline inventories are low, and refineries prioritizing diesel and jet fuel have kept gasoline supply tight.

  Weaknesses

  Compared with diesel, upside leverage is smaller in a prolonged Hormuz disruption scenario.

  Comparison

  Gasoline margin forecasts are relatively stable, but upside is weaker than for diesel.

  Risks

  Seasonal demand softens, refinery output mix shifts back to gasoline, inventories recover faster than expected.

• Brent crude

  Benchmark comparison asset

  Strengths

  Geopolitical disruptions can still support price upside.

  Weaknesses

  In a downside scenario of export recovery, stronger-than-expected output, and more persistent demand losses, the decline could be larger than that of refined-product margins.

  Comparison

  The report emphasizes that downside risk for refined-product margins is smaller than for Brent crude prices.

  Risks

  Normalization of Persian Gulf exports, supply coming in above expectations, persistent demand damage.

Key data

• Q4 2026 U.S./Europe diesel margin forecast46/31 USD/bblPreviously 50/37 USD/bbl; still 2-3x the 2013-2019 seasonal average.
• Q4 2026 U.S./Europe gasoline margin forecast23/13 USD/bblForecast broadly unchanged.
• Remaining unplanned refinery outages in the Persian Gulfabout 1.3 million bpdOutages or repairs may take months to fix.
• 2027 average U.S./Europe diesel margin forecast38/25 USD/bblPreviously 41/29 USD/bbl, still above 2025 levels.
• 2027 average U.S./Europe gasoline margin forecast22/15 USD/bblForecast unchanged.
• 2027 U.S. 3-2-1 crack spread forecast27 USD/bblAnnual average forecast from the report appendix.
• Downside scenario impactU.S. diesel/gasoline margins 14%/9% below base case, Brent 28% lowerAssumes faster Persian Gulf export recovery, stronger-than-expected crude output, and more persistent demand losses.
• Upside scenario impactU.S. diesel/gasoline margins 66% above base case, Brent 41% higherAssumes Hormuz disruptions persist and Persian Gulf exports gradually recover by end-2027.

Impact & implications

For investment and commodity allocation, the implication is that refined-product crack spreads may be more defensive than crude prices and offer stronger asymmetric upside. Refinery margins, diesel crack spreads, and regional refined-product inventories may be more important indicators to monitor than Brent prices alone.

Risks

• Persian Gulf exports recover faster than the base assumption, weakening the tight-refined-product-supply narrative.
• Crude output grows more than expected, combined with more persistent demand losses, pressuring energy prices and margins.
• Capacity additions in China, India, and the Middle East come online faster than expected, restoring global refined-product supply.
• U.S. and European gasoline and diesel inventories rebuild faster than expected.
• Disruptions at Russian refineries ease, or global unplanned refinery outages are repaired faster than expected.

What to watch

• Whether U.S. gasoline and diesel inventories remain below the 2022-2026 seasonal range.
• The repair progress of about 1.3 million bpd of unplanned refining capacity in the Persian Gulf.
• The path of recovery for the Strait of Hormuz and Persian Gulf exports.
• Whether new refining projects in China and India continue to be delayed.
• Changes in attacks on Russian refineries and in global unplanned refinery outages.
• The divergence between market-forward diesel and gasoline crack spreads from Goldman Sachs' forecasts in H2 2026 to 2027.