Goldman Sachs forecasts that global diesel and jet-fuel crack spreads will average above $40 per barrel in 2027, more than double the usual level of around $20. Nikhil Bhandari, Goldman’s co-head of Asia-Pacific natural resources research, stated that high product prices are necessary to induce demand destruction while refineries operate at their highest utilization rates in two decades to meet recovering consumption. This outlook persists despite expectations for Brent crude to stabilize near $80 per barrel as flows through the Strait of Hormuz normalize.
The bank anticipates negative refining capacity growth in 2026, with non-Chinese capacity contracting by roughly 300,000 barrels per day. Product inventories may end 2026 below the lowest days-of-supply levels recorded since 2015. Contributing factors include approximately 2 million barrels per day of Middle Eastern refining capacity remaining offline, damaged Russian facilities restricting supply, and deferred maintenance reducing U.S. refinery runs. Although Group of Seven countries agreed to release 100 million barrels of crude and refined products over four months, analysts from CLSA and Coface argue these measures address liquidity rather than structural stock deficits, potentially extending the timeline for inventory replenishment.
The persistence of elevated crack spreads highlights a structural disconnect between upstream crude availability and downstream refining capacity. While crude production appears stable enough to keep Brent near $80 per barrel, the inability of the global refining network to expand output creates a bottleneck that forces price signals to manage demand. The projection of negative capacity growth outside China underscores a long-term underinvestment in infrastructure, meaning that even modest demand recoveries can overwhelm available processing capabilities. This dynamic shifts market leverage toward refiners, who can maintain higher margins without needing to significantly increase throughput volumes.
Strategic reserve releases offer only temporary relief and risk exacerbating future shortages by depleting buffers needed for stability. As noted by industry analysts, consuming emergency stocks delays the necessary restocking cycle, effectively pushing the burden of inventory rebuilding further into the future. Investors and policymakers should monitor whether sustained high prices successfully curb consumption or if they merely transfer wealth from end-users to refiners without resolving the underlying capacity deficit. The interplay between geopolitical disruptions in Russia and the Middle East and the physical constraints of Western refineries suggests that volatility in refined product markets will remain decoupled from crude oil trends.
