Oil and Gas - Refining and Marketing stocks have been among the strongest performers in 2026, helped by higher refining margins. Conflicts in the Middle East and Russia have disrupted refinery operations, reducing global supplies of gasoline, diesel and jet fuel. Meanwhile, demand for transportation fuels has held up despite higher prices. Limited refining capacity and low fuel inventories have kept product markets tight. Although refining stocks have rallied sharply this year, the industry outlook remains favorable, as repairing damaged facilities and rebuilding inventories will take time.

Against this backdrop, Valero Energy (VLO Quick QuoteVLO - Free Report) , PBF Energy (PBF Quick QuotePBF - Free Report) and Marathon Petroleum (MPC Quick QuoteMPC - Free Report) stand out. All three stocks have more than doubled year to date, but tight fuel supplies and access to cheaper crude grades may leave room for further gains.

YTD Price Performance

Image Source: Zacks Investment Research

What Is Supporting the Refining Industry Rally?

Global Refinery Outages Are Keeping Fuel Supplies Tight: Conflicts in the Middle East and Russia have forced several refineries to curtail or suspend operations. Marathon Petroleum estimates that around 10 million barrels per day of global refining capacity is offline, about 3 million barrels per day above historical levels. Some facilities have suffered physical damage that will take time to repair. With limited spare capacity available, restoring normal fuel supplies may take longer than recovering crude oil flows. This should help keep refining margins at favorable levels.

Low Fuel Inventories and Steady Demand Support Margins: Global refined product inventories remain low, while U.S. diesel inventories are below their five-year range and gasoline stocks are near the bottom of that range. Meanwhile, demand for gasoline, diesel and jet fuel has remained steady despite higher prices. Valero reported healthy gasoline and diesel sales across its U.S. wholesale network, along with strong export demand. With inventories already low, continued fuel consumption is likely to keep product markets tight and support refining margins.

Cheaper Heavy Crude Gives U.S. Refiners an Advantage: Higher shipping costs have made Canadian and Venezuelan heavy crude cheaper than other crude grades. This benefits U.S. refiners such as Valero, PBF Energy and Marathon Petroleum, which can process different types of crude oil and take advantage of lower feedstock costs. U.S. refiners also benefit from cheaper natural gas compared with some overseas competitors. Meanwhile, Marathon Petroleum expects refining margins to remain elevated through at least mid-2027, supported by tight fuel supplies and steady demand.

Is There More Upside for Refining Stocks?

Despite having gained more than 100% so far this year, Marathon Petroleum, Valero and PBF continue to carry a Zacks Rank #1 (Strong Buy). Low fuel inventories, steady demand and wider heavy crude discounts remain favorable for these refiners. Their ability to process cheaper feedstocks and benefit from higher refining margins suggests that the three stocks may have further upside even after their sharp gains. You can see the complete list of today’s Zacks #1 Rank stocks here.

Valero Energy: Valero Energy is a major downstream energy company engaged in refining, renewable diesel and ethanol production. Its network of 14 refineries has approximately 2.5 million barrels per day of crude processing capacity, with a significant presence along the U.S. Gulf Coast. Valero also operates 12 ethanol plants and produces renewable diesel and sustainable aviation fuel through its Diamond Green Diesel joint venture.

Valero's ability to process different crude grades allows it to benefit from wider discounts on Canadian and Venezuelan heavy crude. Its Gulf Coast refineries also enjoy access to cheaper natural gas and lower shipping costs than many overseas competitors. With fuel inventories low and demand holding steady, Valero is positioned to benefit from favorable refining margins. The recently completed St. Charles refinery optimization project should further improve gasoline production and profitability.

Over the past 60 days, the Zacks Consensus Estimate for Valero Energy’s 2026 earnings has moved up 40.5% and indicates 445.1% growth from the year-ago reported number.

PBF Energy: PBF Energy operates refineries across the East Coast, Mid-Continent, Gulf Coast and West Coast, serving several major U.S. fuel markets. Its refining system includes facilities such as Torrance, Martinez, Chalmette, Paulsboro and Toledo, supported by logistics operations. PBF also participates in renewable diesel production through its St. Bernard Renewables joint venture, providing an additional source of earnings.

PBF's complex refining system allows it to process discounted heavy crude and benefit from higher gasoline, diesel and jet fuel margins. Its coastal refineries are particularly well-positioned as global fuel shortages increase the need for imports into these markets. The company is also working to lower operating costs and improve refinery reliability. Its refining business improvement program and projects to increase higher-value fuel production should help strengthen profitability beyond the current favorable margin environment.

PBF Energy’s expected EPS growth rate for three to five years is currently 36.3%, which compares favorably with the industry's growth rate of 33.4%. Over the past 60 days, the Zacks Consensus Estimate for the company’s 2026 earnings has gone up 61.6%.

Marathon Petroleum: Marathon Petroleum is a major U.S. downstream energy company with refining and marketing operations across the Gulf Coast, Mid-Continent and West Coast. Its refining network is supported by extensive pipelines, terminals and other logistics assets. The company's midstream subsidiary, MPLX, provides an additional source of cash flow, while its renewable diesel operations broaden its fuel production portfolio. Marathon has also agreed to sell its St. Paul Park and Mandan refineries to focus investment on higher-return opportunities, mainly along the Gulf Coast.

Marathon's flexible refining system allows it to process discounted Canadian heavy crude and adjust production toward higher-value fuels. Low product inventories, steady demand and limited global refining capacity continue to support margins. Investments at Garyville and Galveston Bay are expected to improve crude processing flexibility and increase production of higher-value fuels. Management expects elevated refining margins through at least mid-2027, providing a favorable outlook for the company's refining operations.

Marathon Petroleum beat the Zacks Consensus Estimate for earnings in each of the last four quarters, with the average being 51.3%. Over the past 60 days, the Zacks Consensus Estimate for the company’s 2026 earnings has gone up 36.3%.