Goldman Sachs has forecast that oil refining profits will remain robust through 2026 due to a tightening supply of petroleum products caused by ongoing conflicts in the Middle East. The bank’s commodity analysts highlight that refining margins, especially for diesel, have surged to two to three times the average levels seen from 2013 to 2019. Diesel refining margins alone are estimated to be $19 to $26 per barrel higher than before March, driven by significant disruptions in fuel production and exports.
The supply crunch stems largely from refinery outages in key producing regions such as the Middle East and Russia. These areas have experienced damage and operational halts amid military conflicts, including the war involving the Strait of Hormuz and drone attacks targeting Russian refineries. As a result, global exports of refined petroleum products have fallen by approximately 4 million barrels per day compared to pre-war levels. In the Middle East, refinery output has dropped by an estimated 2.5 million barrels daily.
The conflict has directly impacted fuel availability, with Gulf states facing refinery shutdowns linked to the ongoing U.S. and Israeli military actions involving Iran. Meanwhile, Ukrainian drone strikes have repeatedly targeted Russian fuel facilities, causing a sharp decline in diesel production. Recent estimates show Russian diesel output fell by 10% last month following another 10% drop in April. To further tighten supplies, Russia has imposed a ban on jet fuel exports until November.
In light of these disruptions, Goldman Sachs projects diesel refining margins in Europe could reach $37 per barrel by the fourth quarter of this year. U.S. refiners may see even higher margins, around $50 per barrel. Gasoline margins are also expected to remain elevated, averaging $14 per barrel in Europe and $22 per barrel in the United States. The analysts anticipate that gasoline and diesel inventories will continue to decline initially as demand recovers faster than refined product supplies once the Strait of Hormuz reopens.
This outlook underscores the broader impact of geopolitical tensions on global energy markets. Reduced refinery output from major exporters combined with lower production from Asian refineries due to war-related damage has intensified supply constraints worldwide. As a result, refining companies stand to benefit from significantly higher profits amid sustained tightness in fuel markets.
Overall, Goldman Sachs’ forecast points to a prolonged period of strong refining margins driven by limited fuel supplies and ongoing regional conflicts. This scenario suggests that oil prices and refining profitability will remain elevated throughout 2026, presenting both challenges and opportunities for energy producers and consumers alike.
