The biggest oil supply squeeze is currently in diesel markets amid the lowest global refining activity for this time of year since the 2020 pandemic, Goldman Sachs says.
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 carried by Bloomberg.
Diesel is “at the epicenter” of the fuel supply crunch, according to the Wall Street bank.
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In July, global refining throughput has slumped by as much as 6.5 million barrels per day (bpd) compared to July 2025, as lower Chinese run rates and the outages in the Middle East and Russia slashed fuel supply.
For diesel specifically, global exports have dropped this month by about 35%, or by 2.6 million bpd, according to estimates by Goldman Sachs.
As a result, the middle distillate markets continue to tighten and inventories are below the seasonal average, setting the stage for even tighter markets if supply is further squeezed, the investment bank said.
Despite the extreme volatility in crude oil markets the past five months, the refined product market continues to tighten with refining margins at record highs because the supply of petroleum products is much tighter than crude supply.
Refining margins held at record highs even as crude oil prices soared last week to $100 per barrel. That’s because global gasoline, diesel, and jet fuel supply is tightening and has been tightening for months amid a combination of factors, most stemming from the wars in Iran and Ukraine.
In a rare statement last week, Fatih Birol, the executive director of the International Energy Agency (IEA), said that “Refinery activity and product supplies have not picked up as much as crude deliveries, meaning that markets for refined oil products, including diesel and gasoline, are considerably tighter than those for crude.”
By Tsvetana Paraskova for Oilprice.com
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