Chicago, IL – March 6, 2025 – Today, Zacks Equity Research Equity arePhillips 66 PSX, Marathon Petroleum MPC, Valero Energy VLO and Galp Energia GLPEY.
Industry: Oil & Gas – Refining & Marketing
Link: https://www.zacks.com/commentary/2425703/4-refining-marketing-stocks-that-can-weather-the-industry-storm
The Zacks Oil and Gas – Refining & Marketing industry faces challenges from volatile crude prices, regulatory pressures and rising operational costs. Seasonal Q4 refining margin weakness and global supply additions could further impact profitability. Capital-intensive refinery upgrades and emissions compliance add financial strain, especially for firms reliant on fossil fuels. Despite these headwinds, the industry holds long-term growth potential.
Strong refining utilization rates and steady demand for gasoline, diesel and jet fuel provide a solid base. Integrated refiners with geographic diversification can optimize margins through efficiency gains and strategic investments. Managing rising costs, including labor and store expansions, remains crucial. However, firms like Phillips 66, Marathon Petroleum, Valero Energy and Galp Energia. Their focus on refinery optimization and sustainability initiatives offers resilience in an evolving energy landscape.
The Zacks Oil and Gas – Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies also operate refined product terminals, storage facilities and transportation services.
The primary activity of these firms involves buying crude/other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refiners are also prone to maintenance and unplanned outages.
Pressure on Margins: The refining and marketing industry faces significant challenges, including fluctuating crude prices and regulatory pressures. Refining margins saw seasonal weakness in Q4, and while demand remains steady, global supply additions could create headwinds. Additionally, geopolitical risks, environmental mandates and rising operational costs may impact profitability. The industry also faces capital-intensive requirements, such as refinery upgrades and emissions compliance, which could weigh on financial performance, particularly for companies heavily reliant on fossil fuel demand.