Oil Comment Recommending Gasoline High Diesel Prices Cause High Gasoline Prices

Commodities Research 16 September 2026 | 10:32PM EDT

Oil Comment: Recommending Gasoline: High Diesel Prices Cause High Gasoline Prices

n Diesel prices continue to trade close to their all-time highs in the US and Europe Yulia Zhestkova Grigsby | as the halt of the East-West pipeline further disrupts crude supplies to refineries Goldman Sachs & Co. LLC (Exhibit 1). We close our long Mar27-Dec27 European diesel timespread Filippo Cuscito recommendation (with a potential gain of $11/bbl or 45%) as diesel prices have | risen sharply and now incorporate a large premium for the risks of further supply Goldman Sachs International

disruptions. We continue to see deferred refined products length as an effective Daan Struyven | hedge against further geopolitical escalation supported by structural refining Goldman Sachs & Co. LLC tightness, but now recommend long summer European gasoline (EBOB Jun27) (Exhibit 2). The key reason for this new recommendation is that refiners’ switching output from gasoline to diesel is rapidly tightening gasoline markets, where less elevated price levels leave room for sharp price upside if the Mideast and Russia-Ukraine conflicts continued to constrain refining output for longer or if more energy infrastructure were damaged. n Gasoline vs. Diesel: Although diesel spot prices may not have peaked as the market continues to discover the necessary price levels for sustainable demand curbs and the initial Russia and Mideast supply shocks (before taking into account the impact of prices on refinery yields and demand) are still disproportionately large for diesel, we now see more price upside opportunities in deferred gasoline than in deferred diesel for five reasons: o Less elevated prices today: Jun27 European prices have risen less since March for gasoline (37%) than for diesel (64%). o Lower diesel price-driven gasoline supply: Concerns about diesel shortages and the resulting price rally increased the spread between US diesel and gasoline to over $60/bbl vs. below $3 a year ago, encouraging refiners to prioritize diesel over gasoline. US diesel yields exceeded seasonal norms in March-August by 0.6pp at the expense of a 1.3pp undershoot in gasoline yields (Exhibit 3). While the data are lagged, Q2 OECD diesel refinery output remains nearly flat year-on-year (yoy), while gasoline refinery output decreased by nearly 2% (Exhibit 4). As a result, global gasoline exports are down 24% yoy, exceeding relative declines in diesel and crude exports (Exhibit 5). o More resilient gasoline demand: Historically, diesel demand tends to be less price-sensitive than gasoline, but high prices pushed global diesel demand down 4% yoy in May-July (on average), while the further diesel rally likely has pushed demand lower over the last month. However, global

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gasoline demand has been more resilient so far, implying that any sharper decline in gasoline demand to prevent further gasoline stocks depletion if the conflicts continued would likely require significantly higher gasoline prices. o Decreasing gasoline stocks: Our OECD commercial stocks nowcast shows both diesel and gasoline near the bottom of their seasonal ranges. However, US diesel stocks have built counter seasonally over the last three weeks, narrowing the gap with the seasonal inventory norm, while OECD gasoline stocks have trended down more sharply this year vs. the seasonal norm (Exhibit 6). o Spillovers from naphtha: Tightening naphtha markets can raise gasoline blending costs via restricting supply of low-octane gasoline blending component (light naphtha) and increasing feedstock costs for octane (heavy naphtha). Global exports of naphtha have been down 30% yoy on average over the last five months, pushing US octane nearly $3/bbl (or 140%) above seasonal norms. n European gasoline vs. US gasoline: While not our base case, any hypothetical restriction to the exports of US refined products would likely increase product prices in Europe vs. the US. We also prefer European…