economy
Refiner stocks are on a nearly unprecedented run. History says it could end soon
Refining is a great business, but if you've had the good fortune to ride this trade this year, it's likely time to take profits.
TL;DR
- Refiner stocks have experienced historic gains in 2026, with major companies showing over 80% increases.
- WTI 3-2-1 crack margins have nearly tripled since January, reaching near $59/bbl.
- The S&P 500 Oil & Gas Refining & Marketing Sub Industry group has jumped 104% this year.
- This level of performance is rare, having occurred only five times in the index's history, with negative average returns in the following six months.
- The current high margins are driven by geopolitical events, which are inherently reversible.
- A ceasefire in the Gulf could lead to sharply lower crack spreads and negatively impact refiner stocks.
- Cyclical businesses often look cheapest at their peak earnings due to falling P/E ratios.
- Demand destruction and supply normalization will eventually influence product markets.
- The article suggests taking profits on current refiner stock gains and considering bearish bets using options for potential crack normalization.