Goldman Sachs Group Inc has warned that the global refining market is set to tighten further due to the Middle East conflict and the Russia-Ukraine war, more than doubling its forecast for diesel production profits.

Analysts Yulia Zhestkova Grigsby and Daan Struyven noted in their report that increased attacks on refineries in the Middle East and Russia are further constraining already limited global refining capacity, driving refined product margins to record highs. Diesel remains the focal point of this surge, they added.

Refinery outages are running 60% above seasonal norms, and despite some demand softening, refined product inventories continue to decline, the analysts stated. For next year, diesel margins per barrel in the United States are now projected to average $63 above Brent crude, with the European Union figure expected at $49, up from previous estimates of $27 and $19, respectively.

The world is facing a global fuel crisis, with refined product prices, including gasoline, rising far faster than crude oil prices. The tightening situation is expected to worsen further as Russia extends its diesel export ban through September and demand picks up in Brazil. Additionally, the approaching Northern Hemisphere winter is anticipated to boost heating demand.

In their August 28 report, Goldman Sachs analysts indicated that while crude exports from the Middle East Gulf may have recovered to 70%-80% of pre-war levels, refined product shipments remain at only 40%. They added that a full recovery in shipments requires a de-escalation of global geopolitical tensions.

Shell Plc Chief Executive Officer Wael Sawan said last week that the refined products market faces a "triple threat" from attacks on Russian refineries and shipping dangers in the Gulf and Red Sea regions. Meanwhile, TotalEnergies SE's Patrick Pouyanne noted that while some crude cargoes are transiting the Strait of Hormuz, no refined products are being shipped out.