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Refiners Slide as US-Iran Peace Hopes Pressure Crack Spreads, TPH Energy Says

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Refining equities and product crack spreads declined last week as reports of progress in US-Iran peace negotiations pressured margins and softened sector sentiment, TPH Energy strategists said in a note on Tuesday.

Matthew Blair, analyst at TPH Energy, said the refining group fell 1.3%, underperforming the S&P 500's 0.9% gain, with high-beta names leading losses.

PBF Energy (PBF) dropped 4.9%, while Phillips 66 (PSX) outperformed the group with a 1.6% rise, making it the lone notable gainer among diversified refiners.

TPH said the decline was driven by a sharp compression in refined product cracks. US gasoline cracks fell $12 to $25 per barrel, while US diesel cracks declined $7 to $45/bbl.

Regional softness was most pronounced in the Midwest, Midcontinent and Rockies, TPH analysts said, reflecting broad-based margin pressure.

International cracks were mixed. Northwest Europe gasoline and diesel eased by $1 and $3/bbl, respectively, while Singapore markets moved against the trend, with gasoline up $3/bbl and diesel rising $5/bbl.

Forward curves also reflected the softer tone. The 2026 gasoline strip moved $1 lower, while diesel was unchanged.

On the crude side, the Brent-WTI spread narrowed to $3/bbl from $5 previously, reducing a key advantage for US refiners that benefit from discounted domestic crude.

Blair said grades, including Mars, Louisiana Light Sweet and Bakken crude strengthened, while Western Canadian Select at Hardisty, Mexico's Maya crude and Alaska North Slope held largely steady.

Macro and industry developments added to the mixed backdrop. US regular gasoline prices eased 5 cents to $4.45 per gallon. India raised retail gasoline prices in response to war-related supply dynamics involving Iran.

Kuwait's refinery throughput has reportedly fallen by half since the Middle East conflict began, while US jet fuel production has climbed above 2 million barrels per day in recent weeks.

On corporate activity, Delek US Holdings (DK) disclosed a $100 million share repurchase authorization from REH. However, despite the recent pullback in refining equities, TPH said most refiners continue to trade above their three-year average forward EBITDA valuation multiples, except for Phillips 66 and Valero Energy (VLO).

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