U.S. Refiners Rally As Crack Spreads Hit Near-Record Levels

According to CNBC, independent oil refiners are benefiting from unusually wide crack spreads as U.S. diesel prices hit $6 per gallon for the first time and Brent crude rose 8.7% last week amid escalating Middle East tensions. Distillate inventories are about 14% below their five-year average, Saudi Arabia shut a key East-West crude pipeline to the Red Sea after damage in an Iraqi attack, and refining margins have risen about 60% quarter to date from the second quarter. The article said global refining capacity has expanded on paper by 400,000 to 700,000 barrels per day over the past two years, but actual fuel production has fallen about 5%, or roughly 4.2 million barrels per day. It added that Western refiners are running at 98% to 103.5% of capacity, while rebuilding disrupted units and logistics could take 12 to 18 months. Valero Energy shares are up more than 140% year to date and hit an intraday record of $399.40 on Monday before trading down nearly 2%. Marathon Petroleum has gained nearly 145% this year and reached an all-time intraday high of $409.50 on Monday before slipping less than 1% in midday trading. Phillips 66 has doubled year to date, touched a record $265.43 on Friday, and was down about 1% on Monday after its board approved a $10 billion increase to its buyback program in July.