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FINWIRES

Refiners Rally as Renewed US-Iran Fighting Lifts Fuel Margins, TPH Says

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US refining equities surged last week, outpacing the broader market as renewed fighting between the US and Iran stoked concerns over energy supplies, driving a sharp climb in gasoline and diesel cracks, TPH Energy Research strategists said in a note Monday.

TPH analysts said refining equities jumped 8% last week, outperforming the broader S&P 500, which gained 1.2%.

Matthew Blair, analyst at TPH Energy, said higher-beta refiners led the advance, with Par Pacific Holdings (PARR) shares rising 12.5%, PBF Energy (PBF) gaining 11.2%, and CVR Energy (CVI) climbing 8.7%.

Blair said that the rally came as renewed US-Iran tensions have stoked concerns over potential disruptions to crude and refined product flows, pushing gasoline and diesel margins higher.

US gasoline cracks rose by about $3 per barrel last week to $40/bbl, with the West Coast and Rockies regions posting the strongest gains.

Diesel margins climbed even more sharply, surging $10/bbl to $53/bbl, buoyed by stronger pricing across the West Coast, Rockies, Gulf Coast and Midwest markets.

TPH said the East Coast and Gulf Coast markets entered Q3 with the largest improvement in refining margins over the quarter.

Meanwhile, global markets showed mixed signals. Northwest Europe gasoline margins climbed $3/bbl to $37/bbl, reaching the highest level in five years, while Singapore gasoline margins weakened by $5/bbl to $23/bbl amid softer regional demand and supply dynamics.

TPH said forward refining margins also strengthened. The 2026 and 2027 6-3-2-1 crack spread futures curves improved by $2/bbl and $3/bbl, respectively, reaching $19/bbl and $14/bbl, driven largely by gains in diesel markets.

Crude oil differentials also improved during the week. TPH said Syncrude and Alaska North Slope crude each widened by $8/bbl over Brent, while other grades, including WTI, Mars, Maya, Western Canadian Select at Houston, Western Canadian Select premiums at Hardisty and Bakken also strengthened.

WTI differentials improved by $1/bbl, while Mars and Maya gained $1/bbl each. Bakken widened by $2/bbl, the bank said.

However, despite the recent rally, most refining stocks remain valued below their three-year forward consensus enterprise value-to-EBITDA averages.

TPH said only Marathon Petroleum (MPC) and Valero Energy (VLO) are currently trading above their historical valuation benchmarks.

Price: $70.20, Change: $+4.42, Percent Change: +6.72%

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