Markets
Refiners Had Their Worst Day Since April 2025
US refining stocks had their worst day since April 2025 on Tuesday as WTI fell back below $100. Valero lost 9.2%, HF Sinclair 8.8% and Marathon 7.4% after regional talks with Iran revived hopes of more crude, unwinding part of a rally that had nearly tripled some shares this year.
The best trade of 2026 had its worst day in eighteen months. On Tuesday, October 27, Valero fell 9.2%, HF Sinclair 8.8%, Marathon Petroleum 7.4% and Phillips 66 7.0%, according to a Benzinga-based market summary, and the energy sector lost 2.05%, the worst of the eleven S&P 500 sectors. It was the refiners' steepest fall since the tariff shock of April 2025. The S&P 500 rose 0.60% the same day.
The trigger was oil. West Texas Intermediate settled at $99.90, down 1.8% and back below $100, and Brent's December contract fell 1.7% to $113.88. Officials from Saudi Arabia, Turkey and Pakistan met Iranian counterparts in Tehran and agreed to keep talking, and traders weighed Iran's signal, reported by Bloomberg, that it could reopen the Strait of Hormuz if the United States lifts its blockade. Gulf crude exports are running at about 65% of their pre-conflict level, so any sign of a deal is a sign of more supply.
Cheaper crude should, in principle, help a refiner, because crude is its main cost. The problem is that refiners' profits this year have come from the price of fuel, not the price of oil. The 3-2-1 crack spread, a rough measure of the margin on turning three barrels of crude into two of gasoline and one of diesel, was about $53 a barrel on October 21 against about $23 a year earlier, after peaking near $70 on October 7, Benzinga reported. A settlement that brings Gulf refineries and tankers back would lower fuel prices faster than crude, and that is the margin investors were selling.
The size of the rally explains the size of the fall. As of October 21, PBF Energy was up 202.5% this year, Marathon 190.3%, HF Sinclair 172.1%, Valero 164.9% and Phillips 66 125.0%, against 12% for the S&P 500. Valero reported third-quarter net income of $6.8 billion, or $23.89 a share, on October 22, six times the year-earlier figure, with a refining margin of $39.24 a barrel against $13.14. Results that strong leave little room for good news, and a crowded trade tends to fall hardest on the first sign that its premise is fading. Russian diesel cargoes arriving under the deal announced by President Trump on October 9 add to the doubt, although Bank of America's Francisco Blanch said they would help "only at the margin".
The market did not wait long for a reminder of the risk on the other side. After the close the Houthis claimed a missile strike on Saudi Arabia's Ras Tanura refinery, and Brent rose about 1.5% in evening trading. Phillips 66 and HF Sinclair report on Wednesday and PBF on Thursday, and their outlooks for fourth-quarter margins will show whether Tuesday was the start of a reversal or a pause in a trade still driven by the war.