The Zacks Oil and Gas - Refining & Marketing industry looks well placed for continued strength. U.S. refiners are benefiting from reliable access to domestic and Canadian crude supplies, which gives them an edge when global oil flows face disruptions. Product inventories also remain tight, especially for diesel, gasoline and jet fuel, while demand from travel, freight, agriculture and exports stays firm. That mix can support pricing power and refining margins. The industry’s outlook is further backed by a strong Zacks Rank, improving earnings estimates and solid one-year performance versus the broader energy sector and the S&P 500. Valuation also remains reasonable, with the group trading below both the sector and market on EV/EBITDA. In this favorable setting, flexible refiners with strong operations and shareholder-friendly strategies stand out. Valero Energy (VLO Quick QuoteVLO - Free Report) , Phillips 66 (PSX Quick QuotePSX - Free Report) and HF Sinclair (DINO Quick QuoteDINO - Free Report) look especially attractive, making them excellent investment options.

Industry Overview

The Zacks Oil and Gas - Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies operate refined product terminals, storage facilities and transportation services. The primary activity of these firms involves purchasing crude or other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refining companies are also prone to unplanned outages.

3 Trends Defining the Oil and Gas - Refining & Marketing Industry's Future

Reliable U.S. Supply is Becoming a Bigger Advantage: Refiners with access to secure North American crude supplies are in a better position when global oil flows are disrupted. While some overseas refineries may struggle with crude availability or shipping delays, many U.S. refiners can keep running because they are linked to domestic and Canadian supply networks. This matters because steady operations help the industry meet demand for gasoline, diesel and jet fuel when global markets are tight. In simple terms, a reliable supply can turn market stress into an opportunity for stronger margins.

Low Product Inventories Can Support Refining Margins: Demand for transportation fuels remains fairly resilient, even with higher prices. At the same time, inventories of products like diesel, gasoline and jet fuel are tight in several markets. This creates a favorable setup for refiners because buyers still need fuel, but supply is not easy to rebuild quickly. Jet fuel and distillates appear especially strong, helped by travel, freight, agriculture and export demand. When inventories are low and replacement supply is limited, refiners usually have better pricing power. That can support industry earnings through the current cycle.

Flexibility is Becoming More Valuable Than Size Alone: The best-positioned refiners are not just running large plants. They are also adjusting what they produce based on market needs. When jet fuel is short, they can shift more output toward jet. When gasoline demand improves, they can raise gasoline yields. When heavy crude is discounted, complex refineries can process more of it and capture better economics. This flexibility helps the industry respond quickly to changing crude prices, product shortages and regional imbalances. In a volatile market, the ability to change the product mix can protect margins and improve cash generation.

Zacks Industry Rank Indicates Positive Outlook

The Zacks Oil and Gas - Refining & Marketing is a 16-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #7, which places it in the top 3% of 245 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates fairly strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the top 50% of the Zacks-ranked industries is a result of improving earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming optimistic about this group’s earnings growth potential. As a matter of fact, the industry’s earnings estimates for 2026 have gone up 65.7% in the past year.

Considering the encouraging dynamics of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Outperforms Sector & S&P 500

The Zacks Oil and Gas - Refining & Marketing industry has fared better than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past year.

The industry has gone up 72.3% over this period compared with the broader sector’s increase of 50.7%. Meanwhile, the S&P 500 has gained 33.2%.

One-Year Price Performance

 

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.

On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA), the industry is currently trading at 6.40X, significantly lower than the S&P 500’s 17.61X. It is also below the sector’s trailing 12-month EV/EBITDA of 7.19X.

Over the past five years, the industry has traded as high as 6.42X and as low as 1.77X, with a median of 3.61X, as the chart below shows.

Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)

 

3 Stocks to Buy

Valero Energy: Valero Energy is a major independent energy company focused on liquid transportation fuels. It operates 14 refineries with about 3 million barrels per day of high-complexity throughput capacity, supported by logistics and wholesale networks across key markets. The Zacks Rank #1 (Strong Buy) company also runs 12 ethanol plants with 1.7 billion gallons of annual capacity.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Beyond refining, Valero is growing in low-carbon fuels through Diamond Green Diesel, which produces renewable diesel and sustainable aviation fuel from recycled feedstocks such as used cooking oil and animal fats. Its strategy centers on disciplined spending, reliable operations, cost control and steady shareholder returns.

The Zacks Consensus Estimate for 2026 earnings of VLO indicates 126.3% growth. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters, with the average being 28%. The company’s shares have increased 116.7% in a year.

Price and Consensus: VLO

Phillips 66: Phillips 66 is an integrated energy company with operations spanning midstream, chemicals, refining, marketing, specialties and renewable fuels. Its asset base connects supply from the wellhead to end consumers, supported by reliable feedstocks, strong operations and access to premium markets across more than 80 countries.

This #1 Ranked company trades large volumes of crude, clean products, NGLs, renewable feedstocks and natural gas, helped by a broad commercial network and global shipping reach. In first-quarter 2026, PSX reported earnings of $207 million and returned $778 million to its shareholders, while staying focused on disciplined spending, debt reduction and steady dividends.

Phillips 66’s expected EPS growth rate for three to five years is currently 38.6%, which compares favorably with the industry's growth rate of 26.4%. The company beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 67.8%. Shares of the company have gained 70.8% in a year.

Price and Consensus: PSX

HF Sinclair: HF Sinclair is a Dallas-based energy company operating across refining, marketing, midstream, lubricants and renewables. It runs seven refineries with 678,000 barrels per day of capacity across the Mid-Continent, West and Pacific Northwest regions. The Zacks Rank #1 company also owns a broad pipeline, storage and terminal network that supports fuel movement across key U.S. markets.

Its well-known Sinclair brand reaches over 1,700 branded retail sites, while its lubricants business sells products in more than 80 countries. HF Sinclair is also building scale in renewable diesel, with about 380 million gallons of annual capacity, supporting cleaner fuel demand and long-term growth.

HF Sinclair has a market capitalization of nearly $13 billion. DINO beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 203.6%. The Zacks Consensus Estimate for HF Sinclair’s 2026 earnings per share indicates 40.5% year-over-year growth. Shares of DINO have gained 127.8% in a year.

Price and Consensus: DINO