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European Cracks Revised Lower But Refining Still Tight: Goldman

OIL PRODUCTS

The refining system remains structurally tight, following significant disruptions and closures over the past seven years according to a note from Goldman Sachs. The market is vulnerable to even small shocks with problems exacerbated by divergent demand, a refining system ill-suited to the lightened slate and hot weather.

  • Price changes driven as much by positioning as bullish fundamentals, with refined products finally reflecting the soft-landing view priced into other asset classes.
  • The NW European Gasoil 4Q23 crack forecast has been revised from 30$/bbl to 28$/bbl and Cal24 from 28$/bbl to 27$/bbl although with concern for depleted inventory levels into hurricane season.
  • The US RBOB gasoline-Brent crack forecast in 2H23 is adjusted from 20$/bbl to 21$/bbl with Cal24 from 20$/bbl to 19$/bbl with downside to winter gasoline cracks as octane constraints ease.
  • US retail gasoline is forecast to average $3.6/gal through 2024.

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