Oil Analyst Running Hard or Hardly Running Effect of Refinery Outages on Runs and Margins

Commodities Research 20 August 2026 | 11:28AM EDT

Running Hard or Hardly Running: Effect of Refinery Outages on Runs and Margins

n Diverging margins and runs. Refined product supply and product margins Yulia Zhestkova Grigsby | typically move together along the supply curve as demand shifts, but Goldman Sachs & Co. LLC unprecedented supply constraints have driven a sharp divergence: global Filippo Cuscito refinery runs are down 7mb/d year-over-year (yoy), while margins remain near | record highs. We analyze the relationship between refinery runs and product Goldman Sachs International

margins and reiterate our constructive view on deferred margins. Daan Struyven | n Capacity outages put a ceiling on runs. Three factors are constraining global Goldman Sachs & Co. LLC

refinery runs despite record margins across regions and US utilization surging to 97%. First, Middle Eastern and Russian refineries are both operating at only 60% of capacity because of unplanned outages from drone and missile attacks. With nearly 10mb/d of global refining capacity currently offline, the 7mb/d yoy drop in runs is consistent with the strong historical negative relationship between outages and refinery runs. Second, China’s refined-product export quota restrictions are weighing on Chinese refinery runs. Third, still-elevated crude prices are curbing refiners’ buying appetite in countries with heavily regulated retail fuel prices. n Margins and runs usually move together. In the short run, elevated refinery runs tend to reflect refiners’ expectations of strong demand and high profitability and therefore coincide with higher margins. The positive relationship between refinery runs and margins reflects a typical upward-sloping supply curve. Higher margins, in turn, incentivize refiners to lift supply, leading to builds in refined-product stocks that eventually weigh on margins. o From margins to runs. We estimate these relationships and find that historically, a $10/bbl rise in the US average of gasoline and diesel margins tends to boost global refinery runs by 0.6-0.8mb/d the following month. We use this framework to model refinery runs, combining refined-product demand on the demand side with lagged product margins and refinery outages on the supply side. o From runs to margins. At the same time, we estimate that a 1mb/d persistent decrease in global refinery runs lowers US diesel margins by $0.7/bbl via a lower utilization rate within a month but boosts margins by $6/bbl after 12 months, as the growing positive effect from lower stocks dominates the negative direct effect from lower utilization.

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n High risk of persistent outages supports our constructive deferred margins view. We estimate that a persistent 1mb/d increase in refinery outages leads to a quick 0.6mb/d decrease in refinery runs and a $3/bbl increase in the fair value of US diesel margins after 12 months (or 14% historically). The boost to margins from outages is likely higher now because of limited spare effective refining capacity (especially in the US) and the larger-than-average effect from stock draws at low stock levels. While expected capacity additions in India and the Middle East should help to ease global refining constraints somewhat, they will be too small to offset current outages if the attacks on refineries persist. n Diesel as geopolitical hedge. Although the Dec26-March27 deferred European diesel (“gasoil”) timespread has risen over 30% since we recommended it as a geopolitical hedge with structural support in late July, we estimate a further price upside of 50-60% in a scenario with persistent outages, and still view deferred diesel timespreads and long European natural gas positions as attractive geopolitical hedges.