Crude oil is "back," but refined oil is "not coming back." The global refining gap is widening.

Crude oil is re-entering the market through shadow vessels and alternative routes, but the gap in downstream refining capacity cannot be filled by logistics alone. Goldman Sachs has therefore significantly raised its 2027 diesel margin forecast, projecting a "higher and longer" premium for diesel. In a report dated August 29, Goldman Sachs raised its forecast for the 2027 profit margin of U.S. diesel against Brent crude from $27 per barrel predicted in February to $63 per barrel, while the European forecast increased from $19 per barrel to $49 per barrel, both more than doubling previous estimates. The direct backdrop to this adjustment is a global decline in refined oil exports of approximately 6 million barrels per day (about 25%) year-on-year, with the Persian Gulf contributing 3.2 million barrels per day and Russia 1.1 million barrels per day, together accounting for about three-quarters of the global shortfall. The report noted that Persian Gulf crude oil exports have returned to 70% to 80% of pre-war levels, but refined oil exports have only recovered to about 40%. Goldman Sachs expects global refinery utilization rates to normalize only by the second half of 2027, with structural diesel shortages likely to persist for a longer duration. Crude oil is "back," but refined oil is "not back." Persian Gulf crude oil exports have recovered to 70% to 80% of pre-war levels, while refined oil exports remain at around 40%. Goldman Sachs estimates that actual crude oil exports from the Persian Gulf are about 15 to 16 million barrels per day, up 5 to 6 million barrels per day from the March low, and significantly higher than real-time tanker tracking dataan increasing number of tankers are shutting off their AIS transmitters and ship-to-ship transfers are increasing, with Iran and Oman advancing a temporary shipping corridor through Hormuz, and Gulf oil-producing countries are also expanding alternative routes to bypass the strait. The trends of crude oil and refined oil are thus diverging: global crude oil exports are down only 10% year-on-year, while exports of diesel, jet fuel, and fuel oil have decreased by 22%, 20%, and 32%, respectively. Price differentials are also evidentdiesel margins have risen by 225% year-on-year, jet fuel by 234%, while crude oil has only increased by 34%. Goldman Sachs believes that the continuously increasing "shadow flow" supply and ongoing alternative routes may limit the upside potential for crude oil prices, even if disruptions in Middle Eastern supply continue. Global refined oil exports have decreased by around 6 million barrels per day (about 25%) year-on-year, with the Persian Gulf and Russia together contributing roughly three-quarters of the decline. Russian refineries have faced attacks that have triggered restrictions on gasoline and diesel exports, while Middle Eastern refineries remain impaired, with shipping routes through the Strait of Hormuz and the Red Sea also disrupted. Goldman Sachs believes that while crude oil can navigate around obstacles, refineries cannot uproot as easilythis distinction is fundamental to the current shortfall compared to past crude supply shocks. Refining bottlenecks lock in long-term high profits. Supply-side recovery will take time. Global refinery outages are about 60% higher than seasonal normal levels, and Goldman Sachs estimates that global refining throughput has decreased by nearly 7 million barrels per day year-on-year. Spare capacity is scarce: U.S. refineries are nearing full capacity, while Asian refineries are facing crude supply constraints, and new capacity additions are insufficient to offset ongoing outages. A six-month supply deficit has begun to impact inventories, with U.S. diesel and gasoline stocks down 9% and 7% year-on-year, respectively. Since February, diesel has accounted for over 40% of the $40 per barrel increase in global refined oil prices, prompting Goldman Sachs to significantly adjust its forecast. Goldman Sachs anticipates that global refinery utilization rates will not return to seasonal normal levels until the second half of 2027, and new capacity will not compensate for the gaps. Additionally, the report noted that freight rates for May 2027 contracts from the Persian Gulf to China have increased about fivefold in one month, indicating that the shipping market has not priced in a rapid return to normalcy. This article is reproduced from "Wall Street Insights," authored by Dong Jing GMTEight, edited by Zheng Yulang.