Goldman Sachs Pivots to Gasoline as Refiners Chase Diesel Profits

Goldman Sachs is advising clients to shift their focus from diesel to gasoline, arguing that a global refinery pivot to maximize diesel production is rapidly tightening gasoline supplies. The bank has closed a profitable diesel trade and now recommends a long position in summer European gasoline contracts.

From Diesel to Gasoline

Goldman Sachs announced it closed its long March 2027-December 2027 European diesel timespread recommendation, which it said yielded a potential gain of $11 per barrel, or 45%. According to the bank, diesel prices, which are trading near all-time highs in the U.S. and Europe, now incorporate a significant premium for supply disruption risks.

With that trade concluded, the firm issued a new recommendation to go long on summer European gasoline, specifically the EBOB June 2027 contract. Goldman's analysts noted that while European diesel prices have surged 64% since March, gasoline has risen a more modest 37%, leaving more room for potential price increases.

Refinery Shift Squeezes Supply

The core of Goldman's thesis is a fundamental shift in refinery operations. A massive rally in diesel prices has dramatically widened the price gap between diesel and gasoline, incentivizing refiners to prioritize middle distillate production.

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Key market dynamics highlighted by the bank include:

• The spread between U.S. diesel and gasoline has ballooned to over $60 per barrel, compared to less than $3 a year ago.
• In response, U.S. refiners' diesel yields exceeded seasonal norms by 0.6 percentage points from March to August, while gasoline yields undershot by 1.3 percentage points.
• In the second quarter, OECD gasoline refinery output fell by nearly 2% year-over-year, while diesel output remained nearly flat.

Gasoline Market Tightens

This production shift is having a direct impact on gasoline availability, with inventories and exports showing signs of strain. Global gasoline exports have fallen 24% year-over-year, according to Goldman's analysis. OECD gasoline stockpiles are also trending down more sharply than seasonal norms.

While global diesel demand fell an average of 4% year-over-year from May to July, gasoline demand has proven more resilient. The bank stated that tightening is also evident in related markets, with global exports of naphtha—a key gasoline blending component—down 30% year-over-year on average for the last five months.