Barclays sees European diesel refining margins at 5-6x normal levels

Investing.com -- Barclays reported that diesel prices at the refinery gate in Europe are currently at close to $170 per barrel, with crack spreads alone of approximately $80 per barrel. Gasoline crack spreads are also running well above average, leading to refinery profitability reaching 5 to 6 times normal levels.

The bank attributed the situation to the Hormuz crisis combined with attacks on the Russian refining system. Barclays stated that diesel crack spreads alone in Europe stand at approximately $80 per barrel, above the Bloomberg consensus oil price forecast for the rest of this year and into 2027.

Gasoline prices at the refinery gate are over $120 per barrel. Barclays does not expect this situation to ease before autumn. The bank identified Repsol, Neste, Galp, and OMV as key equity beneficiaries, noting that all integrated companies should see above-average profitability in their downstream divisions.

Russia has imposed a diesel export ban to prevent domestic shortages following repeated Ukrainian drone attacks on Russian refineries. Heavy crude oil production, which yields higher amounts of diesel when refined, has been curtailed in the Middle East as it flows less easily through pipelines.

Barclays stated that low product inventories have left the energy system fragile, increasing the likelihood that any supply disruption could drive further margin volatility. The bank expects margins to remain strong into autumn and anticipates more rapid micro cycles in both crude prices and refining margins.

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