Refiners have experienced a remarkable increase in stock prices this year, with Marathon Petroleum (MPC) and Valero Energy (VLO) nearly doubling their values, driven by a significant rise in the WTI 3-2-1 crack spread, which has reached around $59 per barrel.
This surge is largely attributed to geopolitical tensions, particularly in the Strait of Hormuz and the ongoing conflict between Russia and Ukraine, which have constrained refined product supply.
Historical data indicates that the S&P 500 Oil & Gas Refining & Marketing Sub Industry group has jumped 104% in 2026, but similar past occurrences have led to negative six-month forward returns averaging -10.1%. Analysts warn that if geopolitical tensions ease, crack spreads could decline sharply, negatively impacting refiners' stock prices.
Current Nymex 3:2:1 spreads are significantly elevated compared to historical averages, suggesting that while refining remains a lucrative business, investors may want to consider taking profits or hedging against potential declines.
The commentary also highlights that the market's perception of high margins may not be sustainable, and a shift in demand or normalization of supply could lead to a reversion in stock prices. For those invested in refiners, particularly Marathon Petroleum, the recommendation is to explore bearish options strategies to capitalize on potential market corrections