Four U.S. refiners closed out a sixth consecutive weekly advance on Friday, a run that has added between a third and over 40% to their share prices since early August.
Marathon Petroleum Corp. (NYSE:MPC) led the group this week, rising 7.1% to $424.07 and 42% over the six-week stretch. HF Sinclair Corp. (NYSE:DINO) gained 7.5% to $115.95, Valero Energy Corp. (NYSE:VLO) added 5.8% to $413.09, and Phillips 66 (NYSE:PSX) rose 5.4% to $273.42.
While crude oil trades roughly $28 a barrel below where it sat in 2022, diesel just printed record after record.
These companies are pocketing the difference.
Over the past six weeks, shares of HF Sinclair and Marathon have both rallied about 43%.
The VanEck Oil Refiners ETF (NYSE:CRAK) has gained 19% over the same period.
It Is Not About The Price Of Crude
The U.S. ultra-low sulfur diesel crack spread, which is the margin a refiner earns turning a barrel of crude into diesel, remains above $100 a barrel, surpassing anything recorded during the 2022 energy crisis.
That gap is the entire trade.
The squeeze has tightened since.
A drone strike on pumping stations along Saudi Arabia’s East-West pipeline this week pushed the national average diesel price above $6.30 a gallon, past the record $5.901 set Sept. 8.
Global distillate inventories were already thin heading into the disruption.
The Margins Are Already In The Numbers
Second-quarter results showed the pass-through before this latest leg higher.
Marathon’s refining and marketing margin jumped to $36.33 a barrel from $17.58 a year earlier.
Valero’s realized refining margin roughly doubled year over year. The two companies returned more than $5 billion to shareholders through buybacks and dividends in the quarter.
Goldman Sachs forecasts U.S. diesel refining profits holding near $63 a barrel into 2027, well below today’s record, but still roughly triple a normal mid-cycle margin.
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