Goldman Sachs Boosts European Refiner Targets on Strong Diesel Outlook

Goldman Sachs has increased its price targets for European oil refiners, citing a significantly more bullish outlook for diesel margins fueled by persistent supply constraints and tight global capacity.

Sharply Higher Margin Forecasts

In a note to clients on Friday, the investment bank raised its 2027 forecast for European diesel margins versus Brent crude to $49 per barrel. This represents a substantial revision from its previous forecast of $19 per barrel and stands far above the 10-year historical average of approximately $17 per barrel.

The update reflects a robust market environment where European benchmark refining margins are currently trading above $40 per barrel, a stark contrast to the typical mid-cycle average of around $7 per barrel, according to the bank's analysis.

Geopolitical and Structural Pressures

Goldman Sachs attributed the strength in refined products to a combination of geopolitical disruptions and structural market tightness. The firm pointed to strikes affecting refineries in the Middle East and Russia as key factors constraining global supply and pushing product margins higher.

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Diesel has been a primary driver of this trend, accounting for over 40% of the $40 per barrel increase in average global refined product wholesale prices since February.

Earnings Boost for Key Refiners

This improved margin environment is expected to directly benefit refiners with high exposure to middle distillates. Goldman Sachs raised its assumptions for diesel and jet fuel crack spreads for the second half of 2026 and for 2027.

As a result, the firm increased its 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates by an average of 35% and its 2027 estimates by 45% for its covered refiners: Neste, Helleniq, and Motor Oil.

These companies are well-positioned as they derive roughly 50% of their product yield from middle distillates like diesel and jet fuel. Despite the significant upgrades, Goldman noted its forecasts remain below the levels currently implied by the forward curve, suggesting a potentially conservative stance.