Goldman Sachs Flags Diesel as Oil Markets' Tightest Squeeze as US Retail Price Hits Five-Month High
US retail diesel reached $5.688 a gallon Wednesday, the highest since April, as war-induced refinery outages erase 4 million barrels a day of global product exports.
US retail diesel climbed to $5.688 a gallon on Wednesday (2026-09-02), its highest level since the initial phase of the US-Iran war in April, according to Rigzone data. NYMEX ULSD heating oil front-month edged down 0.43% to $4.66 a gallon in early Thursday (2026-09-03) trading, but Goldman Sachs analysts said last week (week of 2026-08-24) that "diesel remains at the epicenter of the rally" as the Hormuz conflict continues to reshape global refined product flows.5
The gap between front-month futures and retail prices reflects a physical market under genuine strain. US domestic diesel consumption is running close to 3.5 million barrels a day, and US distillate exports hit nearly 2 million barrels in the week of August 3 (2026-08-03) — a record — leaving US refiners pressed to serve both markets at once.4
Goldman Sachs issued a sharper warning on July 30 (2026-07-30), calling the diesel crunch the largest oil supply squeeze currently active. Global refining throughput had slumped by as much as 6.5 million barrels per day compared with July 2025, with lower Chinese run rates compounding war-induced outages across the Middle East and Russia. For diesel specifically, Goldman estimated that global exports had fallen roughly 35%, or 2.6 million barrels per day.3
The structural damage to global refining runs deeper than headline throughput numbers suggest. Goldman's analysts put global refined product exports at 4 million barrels per day below pre-war levels, with the Middle East alone accounting for a 2.5-million-barrel-per-day drop in output. Russian diesel output fell a further 10% in the month preceding Goldman's July 30 (2026-07-30) note, after a 10% drop in April as drone attacks struck refinery infrastructure.2
US refiners are running at full stretch. But the ceiling is close. Maximum domestic output is capped near 5.3 million barrels a day, Gulf Oil's Tom Kloza said, while global refining capacity is already short by an estimated 7 to 9 million barrels a day — a gap worsened by Venezuela's sustained production decline and Latin America's growing dependence on US distillate imports.4
Refinery margins were offering roughly $90 more per barrel of diesel than crude costs as of mid-August (2026-08-12), according to Kloza. ICE Brent crude front-month was at $95.20 a barrel in early Thursday (2026-09-03) trading. Wholesale diesel was quoted at $180 a barrel, and Kloza warned that a Gulf of Mexico hurricane could push that figure past $200, numbers he described as "apocalyptic."4
Goldman's note from early June (2026-06-02) put refinery margins at two to three times the 2013-to-2019 average, with diesel margins specifically running $19 to $26 per barrel above pre-March levels. The bank said it expected gasoline and diesel inventories to decline further even as some Hormuz shipping resumes, arguing that any product flow recovery would lag the crude normalization by months.2
Some traders are positioned for a faster supply rebound. Bearish signals in ULSD futures carry a weight roughly half the bullish consensus, suggesting a contingent that expects global throughput to recover more quickly than Goldman's base case assumes. Any sustained Hormuz tanker resumption could ease product bottlenecks faster than the front-month contract currently reflects.
Europe is absorbing a growing share of whatever US output escapes domestic consumption. In October 2025, US distillate exports to Europe represented 48.4% of all US distillate exports, up from 43.5% a year earlier, according to EIA data. European buying has since intensified, with Petroplus Holdings having shut three of its five refineries in May (2026-05-15), removing 667,000 barrels a day of European refining capacity from operation.1
US distillate export data in the coming weeks will be the clearest near-term signal for NYMEX ULSD front-month positioning: specifically whether record export volumes hold alongside domestic consumption near 3.5 million barrels a day, or whether physical tightness eventually forces a pullback in export availability and eases some pressure off the contract.4,1