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Can Valero Energy Benefit From Renewed Middle East Tensions?
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Key Takeaways
Valero Energy is likely to benefit as WTI stays below $75, keeping feedstock costs attractive.
Renewed Middle East tensions have supported oil prices, but traders remain cautious on Hormuz risks.
Softer crude prices may also aid Marathon Petroleum and Phillips 66 through lower input costs.
West Texas Intermediate (“WTI”) oil is currently trading below $75 per barrel, according to data from Oilprice.com, significantly down from the more than $100 per barrel mark reached in May this year. However, renewed tensions in the Middle East, following President Donald Trump's statement that the ceasefire agreement with Iran is no longer in effect, are once again supporting oil prices.
Considering the uncertainty arising from the renewed tensions, with the United States and Iran having already exchanged new, intense attacks, and its impact on the flow of oil through the Strait of Hormuz, which is responsible for the flow of significant global oil volumes, traders are taking a cautious approach. Oil prices remaining significantly below the highs seen earlier this year are aiding refiners like Valero Energy Corporation (VLO - Free Report) with relatively attractive feedstock costs.
In other words, VLO, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products. Thus, Valero Energy, which generates significant margin from its refining activities, is likely to benefit from lower oil prices.
Will MPC & PSX Also Gain?
Marathon Petroleum Corp. (MPC - Free Report) and Phillips 66 (PSX - Free Report) are two other leading refining companies that are well poised to gain from the relatively softer crude prices.
MPC runs refining systems that are the largest in the United States. With high utilization of refineries, Marathon Petroleum is well-positioned to capture almost all of the available profitable opportunities.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. It is to be noted that the midstream business, by its very definition, is resilient since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility.
Hence, having a diversified business model, the large-cap stock is insulated from commodity price volatility to a great extent.
VLO’s Price Performance, Valuation & Estimates
Shares of VLO have gained 82.7% over the past year compared with the 38.4% improvement of the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, VLO trades at a trailing 12-month enterprise value to EBITDA of 8.65X. This is above the broader industry average of 5.74X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for VLO’s 2026 earnings has seen upward revisions over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Can Valero Energy Benefit From Renewed Middle East Tensions?
Key Takeaways
West Texas Intermediate (“WTI”) oil is currently trading below $75 per barrel, according to data from Oilprice.com, significantly down from the more than $100 per barrel mark reached in May this year. However, renewed tensions in the Middle East, following President Donald Trump's statement that the ceasefire agreement with Iran is no longer in effect, are once again supporting oil prices.
Considering the uncertainty arising from the renewed tensions, with the United States and Iran having already exchanged new, intense attacks, and its impact on the flow of oil through the Strait of Hormuz, which is responsible for the flow of significant global oil volumes, traders are taking a cautious approach. Oil prices remaining significantly below the highs seen earlier this year are aiding refiners like Valero Energy Corporation (VLO - Free Report) with relatively attractive feedstock costs.
In other words, VLO, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products. Thus, Valero Energy, which generates significant margin from its refining activities, is likely to benefit from lower oil prices.
Will MPC & PSX Also Gain?
Marathon Petroleum Corp. (MPC - Free Report) and Phillips 66 (PSX - Free Report) are two other leading refining companies that are well poised to gain from the relatively softer crude prices.
MPC runs refining systems that are the largest in the United States. With high utilization of refineries, Marathon Petroleum is well-positioned to capture almost all of the available profitable opportunities.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. It is to be noted that the midstream business, by its very definition, is resilient since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility.
Hence, having a diversified business model, the large-cap stock is insulated from commodity price volatility to a great extent.
VLO’s Price Performance, Valuation & Estimates
Shares of VLO have gained 82.7% over the past year compared with the 38.4% improvement of the industry.
From a valuation standpoint, VLO trades at a trailing 12-month enterprise value to EBITDA of 8.65X. This is above the broader industry average of 5.74X.
The Zacks Consensus Estimate for VLO’s 2026 earnings has seen upward revisions over the past 30 days.
VLO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.