Goldman Bets on European Gasoline After the Diesel Squeeze

Goldman Sachs closed a diesel timespread trade on September 16 and told clients to buy European gasoline futures for mid-2027. Diesel is still the scarcer fuel. The bank now says the extra price room is in gasoline, because plants chasing diesel are cutting the other stream.

Commodity analysts Yulia Zhestkova Grigsby and Daan Struyven wrote that refiners switching output from gasoline to diesel are “rapidly tightening gasoline markets.” The same note put the mechanism in one line: “High diesel prices cause high gasoline prices.”

The Yield Shift That Empties Gasoline Tanks

A refinery does not print both fuels at will. When diesel cracks pay more, managers raise distillate yield and take barrels out of the gasoline pool. Goldman had spent the summer calling diesel the epicenter of the squeeze. The September 16 call is the next step in that same shortage: the diesel emergency is now starving gasoline.

That shift was already visible in Europe in August. Trading house Alkagesta said plants were maxing higher-margin middle distillates over light ends, and that cumulative regional gasoline output was down 2.1% year over year, to 47.18 million metric tons. In Spain, Spanish gasoline exports fell 37 percent in the second quarter, to 941,000 metric tons, even as local demand rose 6% to 1.90 million metric tons, the highest second quarter since 2003. Spanish plants raised gasoline output 28% to 2.72 million metric tons and kept more of it at home.

WHERE GASOLINE LOST THE YIELD FIGHT

• Europe’s run cut: Regional gasoline production slipped 2.1% year over year while refiners chased distillate margins.
• Spain’s export hole: Second-quarter gasoline shipments dropped 37% even after a 28% rise in local output.
• Global tanks: S&P Global Energy said gasoline stocks began September at the lowest tracked level for any month in at least 10 years.
• US tanks: Goldman’s August work had US gasoline inventories down 7% from a year earlier, and diesel stocks down 9%.

S&P’s Karim Fawaz, an executive director, said the industry had spent six months managing a record disruption and now had to live with supply staying tight longer than planned. His shop still sees winter as diesel’s hardest season. The gasoline stock print is the piece that matches Goldman’s new trade: the buffer on the motor-fuel side is already gone.

How Thin the Global Fuel Cushion Has Run

The International Energy Agency’s September Oil Market Report puts the shortage downstream of crude. Diesel and gasoil are nearly 30% of world oil demand. Early in September, US diesel and gasoil above $200 a barrel stood 94% over pre-war levels, with Europe and Asia close behind.

THE IEA’S SEPTEMBER FUEL LEDGER

• Plant runs: Global throughputs hit a summer peak of 81.4 million barrels a day in August, up 960,000 from July, and still 4.2 million barrels a day below a year earlier.
• Stock draw: Observed oil inventories fell another 95 million barrels in August, taking the slide since February to 507 million barrels, or 2.8 million barrels a day.
• Gulf diesel: Net diesel and gasoil exports from Gulf producers averaged 390,000 barrels a day in August, just over a quarter of pre-war flows.
• Gulf plus Russia: Combined net diesel and gasoil exports were 1.6 million barrels a day below February, when those two sources were almost 45% of seaborne trade in the fuel.

Gulf oil exports as a whole were about 13 million barrels a day in August, nearly half their pre-war level. Refined product and LPG shipments were nearly 60% lower than in February, a 3.7 million barrel a day hole. Crude has recovered more than fuel. Goldman’s August note made the same split: Persian Gulf crude exports back to 70% to 80% of pre-war levels, product exports still around 40%.

ICE Brent was about $105 a barrel when the IEA filed the report, up $21 from the start of August and 45% above pre-war. The agency still cut 2026 oil demand by 2.5 million barrels a day and sees a 2.6 million barrel a day rebound in 2027. High prices are already eating barrels. They have not refilled tanks.

S&P put August diesel exports at 5.85 million barrels a day, down 25% from August 2025, and said US plants had been running near 97% of capacity. Goldman separately counted a 6 million barrel a day drop in global refined-product exports, with Russia and the Persian Gulf making up three quarters of the loss. Unplanned outages were 60% above the seasonal average at the end of August, Goldman said, and diesel tightness runs into next year.

$63 Diesel, $29 Gasoline, and the Remaining Trade

Goldman did not walk away from diesel. In an August 28 note it more than doubled its 2027 diesel-margin forecasts against Brent, to $63 a barrel in the United States and $49 in Europe, from February marks of $27 and $19. Average 2027 gasoline margins were put at $29 in the US and $22 in Europe. Fourth-quarter 2026 diesel was even richer on that map, at $75 in the US and $65 in Europe, against gasoline at $29 and $21.

GOLDMAN’S FUEL MARGINS AGAINST BRENT

Those diesel numbers are still the larger ones. The September trade is about what is left to go from here. Diesel futures in the US had already settled at a record, and Goldman said average retail diesel had also made an all-time high, with product prices outrunning crude. Gasoline, the analysts wrote, now offered “more upside price opportunities,” citing firmer demand and a relative shift in stocks.

HOW GOLDMAN’S FUEL TRADE MOVED

1. July 30, 2026: Calls diesel the epicenter of the squeeze and recommends a long December 2026 to March 2027 European diesel timespread.
2. August 28, 2026: More than doubles 2027 diesel-margin forecasts and keeps gasoline well below diesel on the same sheet.
3. September 16, 2026: Closes the diesel timespread call and goes long European gasoline for the middle of 2027.

New refining capacity of only 400,000 to 500,000 barrels a day a year in 2026 and 2027 is not enough, on Goldman’s math, to cover lasting Russian outages. Grigsby’s central case has Middle East outages easing by the middle of 2027 while Russian plant damage lasts all year. That is why a gasoline contract dated around next summer can still be the cleaner way to hold the second half of the shortage.

Why the Position Is Mid-2027 Europe

The instrument is European gasoline, not the US pump. Europe is structurally long gasoline and short middle distillates in a normal year, so a forced swing toward diesel hits European gasoline barrels first. Physical Eurobob E5 barges in northwest Europe peaked at $1,141.00 a metric ton on August 21, per Alkagesta, while cash barrels paid a steep premium to the front swap.

London lists cash-settled Eurobob gasoline barge futures on that northwest Europe barge index, in 1,000-ton lots. Tom Kloza, chief energy advisor at Gulf Oil and a co-founder of OPIS, read Goldman’s long as the June 2027 contract. Mid-2027 is also the window when Goldman expects unplanned Middle East outages to ease, and when a northern-hemisphere driving season would meet a market that had spent a winter feeding diesel and heating oil.

US export limits would add a kicker. If Washington ever caps diesel or gasoline shipments to defend the domestic pump, Europe loses a swing source and the Eurobob complex catches the bid. That is a policy risk, not Goldman’s base case. It is why the trade is in Europe’s deferred gasoline, not in a US diesel contract that has already done the violent work.

Refinery Managers Maxed Diesel Months Ago

The weak point in the note is timing. If diesel cracks have been this wide for months, the yield shift is not a fresh event. It is the default setting.

Not sure if I buy the analysis — imply that refiners are only now switching to max diesel from gasoline output. Refinery managers who haven’t maxed diesel would have been fired by now, in my opinion.

Tom Kloza, chief energy advisor at Gulf Oil, on X, September 17, 2026

That objection does not kill the gasoline stock story. It relocates it. If plants already maxed diesel in the second quarter, the 10-year gasoline inventory low is not a trade that still has to happen inside the units. It is a hole that winter distillate demand will keep from being filled. Goldman can be late on the switch and still right that deferred European gasoline has more room than a diesel timespread that has already rerated.

Kloza also flagged the other tail: any US export curb would feed a European gasoline rally. The same unconstrained Western plants now running near the ceiling cannot add a second increment of both fuels. US units near 97% of capacity have little spare diesel to give, and little spare gasoline either.

Crack Spreads Pay the Refiner First

The people who collect this are not crude producers. Product prices have outrun crude all year, which is why Atlantic Basin refining margins sat at records in the IEA’s telling. Maryann Mannen, chair, president and CEO of Marathon Petroleum, said on the company’s second-quarter call that global product balances stayed extremely tight, with some of the lowest gasoline and diesel inventories the firm had seen. Phillips 66, Valero Energy and Marathon have been the listed way to own that gap.

Drivers and freight still pay it. Diesel at more than $200 a barrel in the United States is already in harvest costs, trucking, and the 2026-27 heating season. Gasoline at a 10-year stock low is the next bill if refiners keep surrendering light-end yield to keep diesel flowing. Goldman’s 2027 gasoline margins of $29 and $22 a barrel are modest next to diesel. They are the margin that has not yet done the full rerating.

World oil demand is still falling in the IEA’s 2026 math, then recovering in 2027. A ceasefire that actually reopened Gulf product plants would shrink both cracks. Until those units run again, the barrel that leaves a Western refinery as diesel is a barrel that does not leave as gasoline, and Goldman’s live trade is the second one.

Disclaimer: This article is news reporting and market analysis for information only. It is not investment advice, a solicitation to buy or sell futures, options, refining shares, or any other security, and it is not a personal recommendation of Goldman Sachs’ mid-2027 European gasoline call or any diesel timespread. Fuel and commodity prices can move sharply with war risk, export rules, weather, and refinery outages, and past crack spreads are not a guide to future results. Speak with a licensed financial adviser or commodities broker who can judge your capital, time horizon, and risk limits before you act, and treat every figure here as a snapshot from the cited notes and agency reports, which can be revised.