BY COMFORT OGBONNA
Refined fuel markets are expected to remain under significant pressure through 2026, with margins staying sharply elevated due to ongoing disruptions linked to geopolitical tensions around the Strait of Hormuz, according to a recent analysis by Goldman Sachs. The investment bank said refined product markets have tightened more severely than crude oil markets, driven by structural supply constraints and sustained disruptions to global refining capacity.
Goldman Sachs projects that refined fuel margins will remain between two and three times higher than the 2013–2019 average for the remainder of 2026, reflecting a prolonged period of imbalance between supply and demand. Diesel margins are expected to outperform previous forecasts significantly, exceeding pre-conflict expectations by as much as $19 to $26 per barrel, underscoring the severity of the supply squeeze in middle distillates.
A key driver of the tightening market has been a sharp decline in global refined product exports, which are estimated to be down by approximately 4 million barrels per day year-on-year. This contraction has been led primarily by reduced output from the Persian Gulf and weaker refinery production across parts of Asia, both of which have traditionally played a central role in balancing global fuel markets.
Goldman Sachs noted that even in the event of a partial reopening of trade routes through the Strait of Hormuz, refined product inventories—particularly gasoline and diesel—are likely to continue falling in the near term. The bank explained that fuel demand tends to recover more quickly than supply following disruptions, meaning that stock drawdowns are expected to persist before markets begin to stabilize.
The outlook for diesel markets remains especially strong. The bank forecasts that U.S. diesel margins could reach around $50 per barrel by the fourth quarter of 2026, while European diesel margins are projected to average approximately $37 per barrel over the same period. Gasoline margins are also expected to remain elevated, with U.S. margins forecast at around $22 per barrel and European margins near $14 per barrel.
Structural challenges in the global refining system are also contributing to the extended period of elevated margins. Goldman Sachs highlighted that approximately 2.5 million barrels per day of refining capacity has been disrupted due to war-related outages in the Middle East. In addition, ongoing constraints in crude oil quality and continued attacks on Russian refining infrastructure have further complicated global supply dynamics.
These disruptions have created inefficiencies across the refining value chain, limiting the ability of refiners to adjust output quickly in response to shifting demand patterns. As a result, global refining utilization rates are expected to rise toward record levels by the end of 2026 as demand continues to strengthen while available operating capacity struggles to keep pace.
Despite the near-term tightness, Goldman Sachs also provided a longer-term view, projecting that U.S. and European diesel margins will moderate somewhat in 2027, averaging $41 and $29 per barrel respectively. However, even these levels would remain elevated compared with historical norms, suggesting that structural changes in global energy markets may sustain higher profitability for refiners over an extended period.
The broader outlook reflects a global fuel system under strain, shaped by geopolitical instability, uneven regional supply recovery, and persistent bottlenecks in refining infrastructure. Analysts suggest that these conditions could keep refined product markets highly sensitive to further disruptions, particularly in regions critical to global energy flows such as the Middle East and Eastern Europe.
As energy markets continue to adjust to evolving geopolitical risks and shifting demand patterns, refined fuel pricing is likely to remain a key area of focus for both investors and policymakers navigating an increasingly constrained global supply environment.
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