Goldman Sachs Warns Oil Price Shock to Disproportionately Affect Refined Products

Global Energy Markets in Turmoil Following US-Israeli War Against Iran

The ongoing conflict in the Middle East has triggered the largest oil market shock on record, with significant implications for global energy markets. According to Goldman Sachs Group Inc., refined products such as jet fuel and diesel are poised to be disproportionately affected by the disruptions in oil supplies, rather than crude prices.

The conflict has resulted in the near-complete halt of oil and product exports through the Strait of Hormuz, forcing crude producers to slash oil production and halt some refinery operations. Consequently, crude prices have surged by more than 40% since the first attacks, with Brent topping $100 a barrel.

However, refined products have rallied far more, with fuel costs doubling in recent days in parts of Asia. Countries such as South Korea, China, and Thailand have capped exports to protect local markets. The Goldman analysts highlight that nearly 60% of typical crude exports from the Persian Gulf are medium and heavy crude, which are essential for producing jet fuel, diesel, and fuel oil.

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The severe disruptions in supplies of medium-heavy crude pose a significant risk to global energy markets, with the ability of Persian Gulf producers to export refined products severely impacted. Refinery outages and slashed flows of the types of crude best suited to making fuels are further exacerbating the situation.