Goldman Sachs Sees More Upside in Gasoline as Diesel Crunch Deepens

Diesel prices and margins will continue to grow amid tightening markets, but gasoline could offer even more upside as refiners currently prioritize diesel output, Goldman Sachs says.

The investment bank is switching its key fuel market recommendation away from diesel timespreads and onto European gasoline for the middle of next year in a note carried by Bloomberg.

“The key reason for this new recommendation is that refiners’ switching output from gasoline to diesel is rapidly tightening gasoline markets,” Goldman’s commodity analysts wrote in the note dated September 16.

For months, Goldman Sachs has stressed the significance of a tightening diesel market, saying that the biggest oil supply squeeze is in diesel markets amid the lowest global refining activity for this time of year since the 2020 pandemic.

Diesel is “at the epicenter” of the fuel supply crunch, according to the Wall Street bank.

War-induced refinery outages in the Middle East and Russia have collapsed global fuel supply, especially of diesel, while increased output in the Americas and Africa has managed to offset only about a third of lost supply, Goldman’s commodity analysts wrote in a note at the end of July.

Global diesel stocks are running low due to refinery damage in the Middle East and Russia. According to Goldman’s commodity team, refinery outages were 60% higher than the seasonal average as of the end of August, and the tightness in diesel will extend into next year.

The global refined product market has tightened throughout the summer with refining margins at record highs because the supply of petroleum products is much tighter than crude supply.

Diesel futures are set to rise further, but gasoline now offers “more upside price opportunities,” Goldman’s analysts said this week. They now recommend that investors take long positions in European gasoline futures for the middle of 2027.

By Tsvetana Paraskova for Oilprice.com

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