Crude exports have recovered. Why hasn't refined-product supply kept pace?

  • Persian Gulf crude exports are estimated to have recovered to near their 2025 average, yet refined-product exports remain weak. Goldman Sachs sees bottlenecks at both refineries and in transport: refinery outages in the Middle East and Russia are respectively 1.6 million barrels per day and 4.2 million barrels per day above seasonal norms, while persistent damage limits processing capacity.
  • The workarounds used for crude transport are also harder to apply to refined products. Refined products are more flammable and vary more in specification, making ship-to-ship transfers outside the Persian Gulf more difficult; larger crude cargoes per vessel make it easier to spread fixed security costs, including crew risk compensation.
  • Increased throughput at Western refineries can only partly offset the shortfall. Goldman Sachs' real-time estimates show global refinery throughput is still down 2.5 million barrels per day year on year, indicating that regional increases have yet to restore global supply.

How much more supply disruption can inventories absorb?

  • Buffers at major consumption and trading hubs are already thin: US gasoline and diesel inventories are below their historical ranges; Chinese gasoline and diesel inventories are down 8% and 11% year on year, respectively, while Singapore's middle-distillate inventories are down 44%. New supply disruptions are more likely to feed directly into prices.
  • Adjusting refinery product mixes also comes at a cost. European refineries are prioritizing diesel production, and jet fuel inventories at the Amsterdam–Rotterdam–Antwerp hub have fallen again over the past month, down 56% year on year; securing supply of one fuel intensifies tightness in another.

Why could supply pressures persist into 2027?

  • Less maintenance this autumn has temporarily supported supply, but has pushed some shutdowns into the future. Currently, planned global maintenance is down 1.7 million barrels per day, or 27%, year on year, mainly because US maintenance has been deferred; Goldman Sachs expects planned maintenance to rise significantly in the second quarter of 2027.
  • Relative to seasonal norms, the increase in maintenance is most pronounced in Asia outside China, especially India and South Korea. Both are important refined-product exporters, and concentrated maintenance could reduce diesel and jet fuel exports in the second quarter of 2027; deferring maintenance also increases the risk of unplanned outages.
  • Against a backdrop of highly uncertain supply prospects in the Middle East and Russia, Goldman Sachs reiterated its recommendation to go long European summer gasoline for 2027 as a hedge against further geopolitical escalation. The rationale is the combination of a slow supply recovery, deferred maintenance and low inventories.

With prices supported, why are demand and refinery margins still under pressure?

  • Tight supply and a risk premium have pushed the 28-day moving average of global average retail fuel prices to about 223 dollars per barrel, up 10 dollars per barrel from a month ago. The measure combines gasoline and diesel retail prices, and high prices are already suppressing consumption.
  • Goldman Sachs' real-time estimates show European oil demand and US gasoline demand are each down 2% year on year; it estimates global jet fuel demand in November will rise by only 73 thousand barrels per day year on year, 3% below the trend level. Weak demand is an important constraint on the case for price support.
  • High refined-product prices do not necessarily translate into equally higher profits for refiners. Rising crude freight costs squeeze the net profits of refiners dependent on long-distance crude imports and attract some product tankers to carry crude, further reducing refined-product shipping capacity: transport costs affect both profits and the movement of supply.