Goldman Sachs increased valuations for European refiners on Friday, pointing to a pronounced strengthening in diesel margins driven by constrained supply and a tight refining complex.
The bank revised its 2027 European diesel margin versus Brent forecast to $49 per barrel, up from its prior $19 per barrel projection in February. Goldman noted that this revised number stands well above the roughly $17 per barrel 10-year average.
Current European benchmark refining margins exceed $40 per barrel, Goldman said, compared with a mid-cycle average of about $7 per barrel. The firm attributed the recent margin surge to capacity impacts stemming from rising strikes at refineries in the Middle East and Russia, which have reduced available global refining throughput and pushed refined product margins to new highs.
Goldman highlighted diesel's outsized contribution to recent wholesale price changes. Diesel made up more than 40% of the approximately $40 per barrel increase in average global refined product wholesale prices since February, the bank said.
In response to the market shift, Goldman raised its crack assumptions for diesel and jet for the second half of 2026 and for 2027 to $65 per barrel and $40 per barrel, respectively. These assumptions were previously $50 per barrel for diesel and $25 per barrel for jet.
The adjustments fed through to company-level forecasts. Across Goldman Sachs' coverage, the changes produced an average 35% uplift to 2026 EBITDA estimates and a 45% uplift to 2027 EBITDA estimates for Neste, Helleniq and Motor Oil. Goldman noted these three refiners derive roughly half of their product yields from middle distillates, which include diesel and jet fuel.
Despite the stronger assumptions, Goldman described its outlook as conservative relative to current forward market pricing. The bank's crack assumptions for the second half of 2026 through 2028 remain below levels implied by the forward curve, leaving a degree of upside relative to forward-implied pricing.
The combination of geopolitical disruptions, strike activity and structurally tight refining capacity underpins Goldman's decision to raise price targets and earnings forecasts for European refiners, driven primarily by stronger middle-distillate pricing.