The U.S. refining industry is entering the third-quarter 2026 earnings season amid stronger refining margins, supported by tight global supplies of refined products and higher fuel prices.  These conditions can boost refiners' earnings by widening the difference between the prices they receive for refined fuels and the cost of crude oil. The favorable environment could benefit refiners with efficient operations, strong throughput and disciplined cost management.  However, higher operating expenses, maintenance requirements and changes in fuel demand could limit the gains.

Three companies worth watching are Marathon Petroleum Corporation (MPC Quick QuoteMPC - Free Report) , Valero Energy Corporation (VLO Quick QuoteVLO - Free Report) and Phillips 66 (PSX Quick QuotePSX - Free Report) . Their second-quarter 2026 results highlight the benefits of stronger refining margins, while differences in their operations and financial priorities offer investors distinct ways to gain exposure to the industry.

Refining Margins Strengthen Amid Tight Fuel Supplies

The U.S. Energy Information Administration (“EIA”) reported that U.S. refinery utilization averaged 95% in the third quarter of 2026, the highest crude-processing level for that quarter since 2019. The quarterly average gasoline crack spread more than doubled from a year earlier, while distillate and jet fuel crack spreads almost tripled.

A crack spread measures the difference between the price of crude oil and the value of the refined products produced from it. Wider spreads can improve refining profitability, provided operating costs and other factors remain manageable.

Supply conditions also supported margins. For the week ended Sept. 25, U.S. distillate inventories were 13% below their five-year seasonal average, while gasoline inventories were 7% below average. Disruptions to refining operations in Russia, China and the Middle East contributed to tighter global supplies.

However, the EIA noted that gasoline crack spreads declined during the second half of the quarter. This suggests that refining margins can change quickly as supply, demand and crude oil prices shift.

Against this backdrop, Marathon Petroleum, Valero Energy and Phillips 66 are well positioned to benefit from stronger refining margins and tighter fuel supplies.

Marathon Petroleum: Strong Refining Margins Drive Earnings Growth

Marathon Petroleum's second-quarter 2026 results highlight the earnings potential of stronger refining margins. The company reported net income of $5.1 billion, or $17.73 per diluted share, compared with $1.2 billion, or $3.96, in the prior-year quarter.

Its Refining & Marketing segment generated adjusted EBITDA of $6.7 billion, up from $1.9 billion a year earlier. The segment's refining margin increased to $36.33 per barrel from $17.58, while crude capacity utilization reached 94%. Total throughput averaged 2.9 million barrels per day.

Marathon Petroleum's large refining system and integrated midstream operations provide exposure to favorable fuel-market conditions. The company also returned more than $2.8 billion to its shareholders during the quarter.

However, refining operating costs increased to $5.72 per barrel from $5.34 a year earlier, partly reflecting planned downtime. The challenge for Marathon Petroleum is to sustain strong margins while managing costs and maintenance requirements. While Marathon Petroleum offers substantial refining exposure, Valero Energy combines a large refining business with additional renewable fuel operations.

Valero Energy: Strong Refining Profits and Shareholder Returns

Valero Energy also benefited from stronger refining conditions. The company reported second-quarter net income of $3.7 billion, or $12.62 per share, up from $714 million, or $2.28, in the year-ago quarter.

The Refining segment reported operating income of $4.5 billion, up from $1.3 billion in the prior-year quarter. Refining throughput averaged 3 million barrels per day.

Valero Energy's geographic reach and refining scale provide exposure to multiple fuel markets. Its renewable diesel and ethanol operations also offer additional earnings sources, although their profitability can differ from that of conventional refining.

The company returned $2.6 billion to its shareholders during the quarter and ended June with $7.9 billion in cash and cash equivalents. Its net debt-to-capital ratio stood at 11%.

Compared with Marathon Petroleum, Valero Energy offers a similar large-scale refining business but also has exposure to renewable fuels. Investors should assess whether favorable refining conditions can continue to support earnings and shareholder returns as fuel demand and operating costs change.

Phillips 66: Higher Refining Margins Support Debt Reduction

Phillips 66's second-quarter 2026 results show another way to benefit from stronger refining conditions while pursuing broader financial priorities. The company reported earnings of $3.85 billion, or $9.55 per share, compared with $207 million in the first quarter. Adjusted earnings reached $3.79 billion, or $9.41 per share.

The Refining segment's realized margin increased to $24.08 per barrel from $10.11 in the first quarter. Crude capacity utilization improved to 96%, while higher market crack spreads contributed to stronger refining profitability.

Phillips 66 also reduced total debt to $20.6 billion from $27.1 billion at the end of the first quarter, bringing net debt to $16.5 billion.

Unlike a business focused primarily on refining, Phillips 66 operates across midstream, chemicals, marketing and specialties, and renewable fuels. This diversification provides additional sources of earnings, although weaker performance in other segments could offset some refining gains.

Compared with Marathon Petroleum and Valero Energy, Phillips 66 combines refining exposure with a broader business portfolio and debt reduction. Its future performance will depend on whether strong refining margins translate into sustained cash flow while the company manages costs and capital spending.

Conclusion

EIA data indicate that tight fuel supplies and stronger refining margins created a favorable operating environment for U.S. refiners in the third quarter of 2026. Marathon Petroleum, Valero Energy and Phillips 66 entered the period with strong second-quarter results, although their business models and financial priorities differ.

Marathon Petroleum offers substantial refining exposure and significant shareholder returns, Valero Energy combines refining scale with renewable fuel operations and Phillips 66 provides a diversified portfolio alongside debt reduction.

However, elevated margins may not last if fuel supplies improve, demand weakens or crude oil costs rise faster than refined-product prices. Investors should compare the companies' third-quarter earnings, realized margins, throughput, operating costs and cash flow to determine whether the favorable market environment is translating into sustainable financial performance.