U.S. refining capacity is shrinking even as fuel demand holds firm, a combination that analysts expect to keep refined product supplies tight through 2026. The Energy Information Administration estimates that refining output declined by 190,000 barrels per day in 2025 and will fall by a further 180,000 barrels per day in 2026, reflecting plant closures and permanent capacity removals.

Goldman Sachs expects fuel supply disruptions linked to the Strait of Hormuz crisis and refinery outages to keep refining margins, particularly for diesel, significantly above historical averages through most of 2026. The bank pointed to very high diesel crack spreads in both Europe and the United States as a persistent feature of the market.

EIA weekly petroleum data show the remaining refinery fleet running near its limits, with refineries operating at 94.5% of operable capacity in late May. The agency forecasts that combined inventories of gasoline, distillate fuel oil and jet fuel will fall to their lowest levels since 2000, and that jet fuel days of supply will decline to about 21 days, the lowest since 1963.

In California, the pressure is compounded by the closure of the Phillips 66 Los Angeles refinery and Valero's planned shutdown of its Benicia plant, which together remove roughly 17% of the state's refining capacity.

Source: OilPrice.com -- https://oilprice.com/Latest-Energy-News/World-News/Goldman-Sachs-Sees-Strong-Refining-Profits-Through-2026-Amid-Fuel-Supply-Crunch.html