Goldman: Diesel prices set to stay high through 2027 as refineries struggle to meet demand
Goldman Sachs projects elevated diesel prices persisting through 2027, driven by refinery constraints that must suppress demand to stabilize the market. Cracks for diesel and jet fuel are expected to surpass $40 per barrel, significantly higher than typical levels. This outlook indicates a critical phase in energy markets, with potential spillover effects on inflation and broader economic conditions, thereby influencing currency valuations and trader sentiment in the FX space.
Where it sits in our coverage
Our consensus target for the EUR/USD pair is currently 1.075, with Goldman Sachs aligning at the upper boundary of the spectrum, estimating around 1.12. Meanwhile, BofA's more conservative forecast sits at 1.04, suggesting a diverse view among firms on the currency's trajectory influenced by these energy price forecasts. Other firms may similarly align with or diverge from this range based on anticipated market responses to commodity price changes.
How firms align
Goldman's bullish stance on diesel prices could align closely with views from JPMorgan, who also project a stronger euro amid rising energy prices. Conversely, BofA appears more cautious, likely creating pressure on the EUR/USD through their lower target amidst tightening energy supplies. For further insights, refer to our reports on the respective firm views in /reports/goldman and /reports/bofa.
What the data shows
Recent forecasts suggest that sustained high diesel prices could influence broader inflation metrics and potentially spur currency volatility. Further analysis is available in our latest insights, which examine the interconnectedness of energy prices and currency movements at /research/energyfxinsights.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Goldman expects diesel prices above $40/bbl through 2027, influencing inflation.
- 02Traders should note potential euro strength from high energy prices.
- 03Stay alert to changes around 1.075 on EUR/USD as market reacts.
- 04JPMorgan aligns with a bullish view, potentially validating bullish EUR position.
Market implications
Watch for EUR/USD movements around the 1.075 level as global fuel prices evolve. Anticipate reactions to refinery output reports or OPEC decisions on production cuts, which could impact currency flows. Our consensus number may shift based on these developments.
Risks to this view
Should refinery outputs improve significantly or if OPEC decides on an aggressive production increase, the bullish outlook on diesel prices, and consequently on the EUR, could be invalidated. A sharp pullback in energy prices would pressure forecasts across the board.
Sentiment by currency
USD+EUR JPY~GBPComposite USD score: +0.55
Firms mentioned
Sources & References
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