- Energy firms are trying to boost jet-fuel output as Iran war disruptions ripple through oil markets.
- But producing more jet fuel could tighten supply of other products like diesel, naphtha, Goldman Sachs warns.
- Crude oil prices are surging after President Donald Trump and Iran rejected each other's peace plans.
Energy companies are trying to produce more jet fuel to offset disruptions tied to the war in Iran, but that could tighten supplies of other fuels instead.
"The refining industry is very efficient in finding supply at the right price levels, and we've certainly created the right price environment for global refining to try to optimize, to maximize jet-fuel production," said Jerome Dortmans, the cohead of global oil and products trading at Goldman Sachs, on the bank's "The Markets" podcast published on Friday.
Jet fuel prices have risen sharply amid the conflict in the Middle East, raising costs for airlines and straining fuel supplies ahead of the peak summer travel season.
While the loss of Middle Eastern supply has been "meaningful" for Europe's jet-fuel market, Europe still has sufficient strategic stock to cope for an extended period of time, Dortmans said. And refiners can ramp up jet fuel yields in response to higher prices and tighter supply.
However, Dortmans warned that producing more jet fuel is not a simple fix. Refineries can adjust the mix of fuels they produce, but increasing output of one fuel can tighten supplies of others made from the same barrel of crude oil.
"By solving the jet problem, we could be creating other problems and other choke points within the refinery system," he added.
This means the broader refined-product markets could remain tight even if crude prices stabilize, keeping prices high this summer for fuels like diesel and other refined products like naphtha, Dortmans said.
Dortmans' comments come as energy markets shift from fears of outright crude shortages toward concerns about refining bottlenecks and fuel imbalances heading into the peak summer travel season.
Crude oil prices are surging after President Donald Trump and Iran rejected each other's latest peace proposals to end the war. International Brent crude oil futures were trading around $106 per barrel, while US West Texas Intermediate crude futures were around $100 per barrel. Both grades were over 4% higher early on Monday.
The post Goldman Sachs says the jet-fuel crunch can be fixed — but warns of another fuel squeeze appeared first on Business Insider
