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Refining Boom Returns as Geopolitical Tensions Push Fuel Profits to Multi-Year Highs, TPH Says

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US refiners are on track to report one of their strongest quarters in years as geopolitical disruptions drove fuel margins sharply higher, TPH Energy Research analyst Matthew Blair said in a note on Wednesday.

Average Q2 2026 earnings per share are projected at $6.53, above the consensus estimate of $6.20 and up from $0.59 in Q1.

Blair said the quarter is shaping up to be the industry's most profitable since market disruptions following Russia's invasion of Ukraine in 2022.

Global refining runs fell to an estimated 78 million barrels per day in Q2 from 83 million b/d in Q1, reflecting the closure of the Strait of Hormuz and increased Ukrainian drone attacks on Russian refineries.

Tighter supply pushed US gasoline crack spreads to an average of $25/bbl in the quarter, up from $9/bbl in Q1 and $16/bbl a year earlier.

Diesel crack spreads climbed to $45/bbl from $30/bbl in the previous quarter and $17/bbl a year earlier. Margins improved across most US refining regions, with the Southwest and Gulf Coast posting the largest gains over the year. Jet fuel and naphtha margins also strengthened.

In Asia, Singapore gasoline and diesel crack spreads rose to $33/bbl and $69/bbl, respectively, from $16/bbl and $41/bbl in Q1. Singapore diesel margins reached five-year highs during much of the quarter.

Higher fuel margins were partly offset by tighter crude price differentials, steeper backwardation and higher tanker rates. Backwardation indicates strong near-term demand or tight spot supply, with futures prices trading below spot prices.

Marathon Petroleum (MPC), PBF Energy (PBF) and Phillips 66 (PSX) are expected to post the largest earnings beats versus consensus, while CVR Energy (CVI) and Delek US Holdings (DK) may underperform expectations.

The third quarter has also started strongly, with gasoline and diesel margins rising further amid renewed US-Iran tensions and continued constraints on shipping through the Strait of Hormuz.

Blair forecasts average third-quarter earnings per share of $5.91, roughly in line with the consensus estimate of $5.94.

Price: $296.79, Change: $-6.61, Percent Change: -2.18%

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