Overview
Barclays has highlighted extremely strong refining economics in Europe, where diesel at the refinery gate is trading close to $170 per barrel and diesel crack spreads alone are about $80 per barrel. Those crack spreads, together with gasoline crack spreads that are running well above average, have lifted refinery profitability to roughly 5 to 6 times normal levels.
Drivers cited by the bank
The bank attributes the current environment to two principal supply-side shocks - the Hormuz crisis and a series of attacks that have affected the Russian refining system. Barclays notes that diesel crack spreads of about $80 per barrel sit above the Bloomberg consensus oil price forecast for the remainder of this year and into 2027.
Gasoline and downstream implications
Barclays reports gasoline prices at the refinery gate above $120 per barrel. Given the elevated product prices and crack spreads, Barclays does not expect the situation to ease before autumn. The bank identifies Repsol, Neste, Galp and OMV as the principal equity beneficiaries, observing that all integrated companies should see above-average profitability in their downstream businesses.
Supply-side constraints and policy responses
In response to domestic vulnerabilities after repeated Ukrainian drone strikes on Russian refineries, Russia has implemented a diesel export ban to avoid local shortages. Meanwhile, heavy crude production in parts of the Middle East - which yields a higher diesel proportion when refined - has been curtailed because it flows less easily through pipelines, according to Barclays.
Inventory backdrop and margin outlook
Barclays warns that low product inventories have left the energy system fragile and raised the probability that any further supply disruption could produce additional margin volatility. The bank expects margins to remain strong into autumn and anticipates more rapid micro cycles affecting both crude prices and refining margins.