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Energy companies are trying to boost jet fuel production as the damage from the Iran war ripples through oil markets.
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But Goldman Sachs warned that producing more jet fuel could tighten supplies of other products such as diesel and naphtha.
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Crude prices surged after President Donald Trump and Iran rejected each other’s peace plans.
Energy companies are trying to produce more jet fuel to offset disruptions related to the Iran war, but that could strain supplies of other fuels.
“The refining industry is very efficient at finding supply at the right price levels, and we’ve certainly created the right price environment for global refining to try to optimize and maximize jet fuel production,” Jerome Dortmans, Goldman’s co-head of global oil and products trading, said on the bank’s “Markets” podcast released Friday.
Jet fuel prices have risen sharply during the conflict in the Middle East, raising costs for airlines and straining fuel supplies ahead of the summer travel season.
Dortmans said that while the loss of supplies from the Middle East was “significant” for the European aviation fuel market, Europe still had enough strategic stocks to cope for an extended period of time. Refiners can ramp up jet fuel production in response to rising prices and tight supplies.
However, Dortmans warned that producing more jet fuel is not a simple solution. Refiners can adjust the mix of fuels they produce, but increasing production of one fuel may tighten the supply of other fuels produced from the same barrel of crude oil.
“By solving the jet problem, we may create other problems and other chokepoints within the refinery system,” he added.
That means the broader product market is likely to remain tight even as crude prices stabilize, Dotmans said, keeping prices for fuels like diesel and other refined products like naphtha at the high levels they experienced this summer.
Dortmans’ comments come as energy markets shift from worries about outright crude shortages to worries about refining bottlenecks and fuel imbalances heading into the summer travel season.
Crude oil prices surged after President Donald Trump and Iran rejected each other’s latest peace proposals to end their war. International Brent crude futures are trading at about $106 a barrel, while U.S. West Texas Intermediate crude futures are trading at about $100 a barrel. Scores for both grade levels were up more than 4% earlier Monday.
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