In this piece, we will take a look at eight best oil refinery stocks to invest in.
The global oil refining industry has undergone significant shifts over the past few years, driven by geopolitical tensions, changes in consumption patterns, and emerging market demands. As of 2023, the world’s refining capacity was estimated at 103.5 million barrels per day (b/d), according to the U.S. Energy Information Administration (EIA). With the recent disruptions in petroleum markets, such as Russia’s invasion of Ukraine and supply chain challenges due to COVID-19, there is heightened interest in how much refinery capacity will come online in the coming years to meet the rising demand for petroleum products. This interest is primarily centered on new projects expected to be operational by 2028, most of which are in high-demand regions like Asia-Pacific and the Middle East. The EIA’s analysis suggests that between 2.6 million b/d and 4.9 million b/d of additional refining capacity will be added globally over the next four years.
The focus on expanding refining capacity in countries such as China, India, and those in the Middle East stems from their rapid economic and population growth, which translates into a rising need for refined petroleum products. While countries in the Atlantic Basin, including the United States and Europe, have seen stagnating demand, the Asia-Pacific and Middle Eastern markets continue to grow robustly. These regions have also experienced increased investments in refining projects. For instance, Saudi Aramco has consistently been the largest investor in refinery capital expenditures, allocating over $9 billion annually since 2017, while China and India collectively contributed between $15 billion to $28 billion each year.
In contrast, refiners in the Atlantic Basin are expected to face slower demand growth and fierce competition. Refineries in these regions may encounter additional headwinds due to planned closures and the transition to renewable energy sources, which is further complicated by supply chain disruptions and geopolitical conflicts. Refinery expansions in countries like Nigeria and Mexico will also contend with distinct market conditions compared to the surging demand in Asia and the Middle East. Recent geopolitical tensions, such as Houthi attacks in the Red Sea, have increased shipping costs and further isolated the Atlantic and Pacific markets, reinforcing these divergent trends.
Global consumption of liquid fuels is projected to increase steadily through 2028, with the EIA estimating a rise to 105 million b/d by 2028. This demand is being fueled by a burgeoning middle class and higher incomes in developing nations, leading to increased consumption of consumer goods and transportation fuels. In response, refiners are ramping up capacity to meet this demand growth, with most of the projects concentrated in Asia and the Middle East. However, the Atlantic Basin market will see much slower demand growth, which could hinder investment in new refining projects. Consequently, the refinery expansions in the Atlantic Basin will likely lag behind those in the Pacific Basin.
The dynamics of the refining sector are further complicated by shifts in global crude oil production and trade. The EIA’s International Energy Outlook 2023 indicates that OPEC+ will continue its production restraint through 2028, potentially limiting crude oil exports from Middle Eastern producers. This could have profound implications for refiners in countries outside of OPEC+, such as the United States, Canada, and Brazil, who will need to supply crude oil to these new refining capacities in Asia and the Middle East.
Despite the challenges, the global refining landscape is witnessing a surge in capital expenditures from major players. The EIA’s report shows that 39 global refiners invested a total of $71 billion in 2023, marking a slight decline from 2022 levels after adjusting for inflation. The investment landscape is shaped by factors like growing crack spreads—the difference between petroleum product prices and crude oil prices—which have driven much of the capacity expansions over the past two decades. Although crack spreads remained strong in mid-2024, they have narrowed since the record levels of 2022. Nevertheless, several projects announced before the recent decline in crack spreads are expected to come online by 2028.
In summary, the outlook for the oil refining industry is marked by growth in capacity centered in the Asia-Pacific and Middle East regions, where demand is projected to rise sharply. While the Atlantic Basin market faces a more challenging environment, investments in refining projects remain significant. As geopolitical tensions and market dynamics continue to evolve, the industry must navigate a complex landscape to capitalize on emerging opportunities and address potential risks. Keeping this context in view, let’s take a look now at eight best oil refinery stocks to invest in.
stockphoto mania/Shutterstock.com
Our Methodology
For this article, to compile our list of the best oil refinery stocks, we used Finviz stock screener and narrowed our focus from the broader oil industry to firms that limit themselves to oil refineries. A list of the 21 largest oil refining firms was initially compiled. From this dataset, we selected the top ten stocks most favored by institutional investors and ranked them in ascending order based on the number of hedge funds holding stakes in these firms as of Q2 2024.
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08. Clean Energy Fuels Corp. (NASDAQ:CLNE)
Number of Hedge Fund Holders: 24
Clean Energy Fuels Corp. (NASDAQ:CLNE) has established itself as a prominent player in the renewable energy sector by offering a diverse portfolio of low-carbon fuel solutions for transportation. While primarily known for its renewable natural gas (RNG) offerings, the company’s operations extend to providing compressed natural gas (CNG) and liquefied natural gas (LNG) for medium and heavy-duty vehicles across the United States and Canada. Its integrated business model includes operating a network of fueling stations, transporting natural gas through virtual pipelines, and developing RNG projects that are expected to bolster the supply of clean fuels. Although Clean Energy Fuels Corp. (NASDAQ:CLNE) is not a traditional oil refiner, its focus on supplying cleaner alternatives to conventional petroleum products positions it as a compelling investment for those looking to capitalize on the ongoing transition in the energy sector. With rising demand for environmentally-friendly fuel options and government incentives for adopting green energy, the company is strategically aligned to benefit from this shift, making it a noteworthy inclusion in the list of eight best oil refinery stocks to invest in.
The company’s Q2 2024 financial results reflect its solid business fundamentals. Clean Energy Fuels Corp. (NASDAQ:CLNE) reported $18.9 million in adjusted EBITDA for the quarter, a notable increase from $12 million in Q2 2023, showcasing growth in profitability. Revenue for the quarter stood at $98 million, up from $90 million in the same period last year, indicating a consistent rise in sales driven by higher fuel volumes and new customer acquisitions. The company sold 57 million gallons of RNG in Q2 2024, highlighting the growing demand for cleaner fuel options. Furthermore, Clean Energy Fuels Corp. (NASDAQ:CLNE) ended the quarter with nearly $250 million in cash and investments, positioning it well for future expansion and strategic investments.
The expansion of Clean Energy Fuels Corp. (NASDAQ:CLNE) Boron facility in California, which increased its output capacity by 50%, has played a significant role in meeting the growing LNG demand, particularly from the commercial maritime industry. Clean Energy Fuels Corp. (NASDAQ:CLNE) partnership with Pasha Hawaii, for example, has led to a substantial increase in LNG consumption, contributing to the company’s revenue growth. The company’s extensive network of over 600 fueling stations, with 200 publicly accessible locations, provides a strategic advantage as more fleets adopt natural gas trucks.
Additionally, Clean Energy Fuels Corp. (NASDAQ:CLNE) focus on RNG production through dairy and livestock waste projects further solidifies its position in the low-carbon energy market. With multiple RNG projects in the pipeline and a strategic partnership with Tourmaline in Canada, Clean Energy is poised to capture a larger market share in the renewable energy space. These factors make Clean Energy Fuels Corp. (NASDAQ:CLNE) an attractive investment opportunity in the oil and gas sector.
07. Par Pacific Holdings, Inc. (NYSE:PARR)
Number of Hedge Fund Holders: 25
Par Pacific Holdings, Inc. (NYSE:PARR) is a key player in the energy and infrastructure industry, specializing in oil refining operations that make it a strong contender in the list of top oil refinery stocks to invest in. The company manages refineries that produce a range of products including gasoline, diesel, and asphalt, catering to demand primarily in regions like Hawaii, Wyoming, Washington, and Montana. This strategic positioning in underserved markets has helped Par Pacific Holdings, Inc. (NYSE:PARR) capture unique opportunities within the refining sector, making it an attractive stock for investors looking to gain exposure to the oil refining space.
In the second quarter of 2024, Par Pacific Holdings, Inc. (NYSE:PARR) delivered a solid financial performance with adjusted EBITDA reaching $82 million and net income per share of $0.49. This strong performance was driven by robust operations across its refineries and effective maintenance execution, particularly at its Billings refinery, which saw a successful turnaround and is now positioned to increase utilization rates. This focus on operational reliability has allowed Par Pacific Holdings, Inc. (NYSE:PARR) to optimize production and increase throughput across its refineries, contributing to its solid revenue generation.
Par Pacific Holdings, Inc. (NYSE:PARR) refining segment achieved a combined throughput of 180,000 barrels per day in the second quarter, reflecting efficient operations in Hawaii, Wyoming, and Washington. In Hawaii, the refinery maintained a high operational availability rate of 99% and achieved consistent production costs of $4.50 per barrel, highlighting the efficiency of its refining processes. The Wyoming refinery, on the other hand, set a new record for throughput at 19,900 barrels per day with production costs of $7.08 per barrel. These figures demonstrate Par Pacific’s ability to maintain stable production costs while expanding its operational capacity.
On the strategic front, Par Pacific Holdings, Inc. (NYSE:PARR) continues to invest in growth initiatives, including a renewable hydrotreater conversion in Hawaii, positioning it to take advantage of the growing demand for renewable energy. Additionally, the company has made significant strides in reducing its debt and repurchasing $65 million worth of stock, indicating a strong balance sheet and commitment to returning value to shareholders. With its focus on refining efficiency, strategic investments, and solid financial metrics, Par Pacific Holdings, Inc. (NYSE:PARR) is well-positioned for future growth and remains a compelling choice among oil refinery stocks.
06. Delek US Holdings, Inc. (NYSE:DK)
Number of Hedge Fund Holders: 26
Delek US Holdings, Inc. (NYSE:DK) is a prominent player in the oil refining industry, making it an ideal candidate for inclusion in a list of the best oil refinery stocks to invest in. The company operates through three main segments: Refining, Logistics, and Retail. Delek US Holdings, Inc. (NYSE:DK) refining segment focuses on processing crude oil and other feedstocks to produce gasoline, diesel fuel, aviation fuel, asphalt, and various other petroleum products. The company’s refining operations span multiple locations, including refineries in Texas, Arkansas, and Louisiana, making it a significant contributor to the U.S. energy infrastructure.
Delek US Holdings, Inc. (NYSE:DK) recent financial performance reflects its resilience in a challenging market environment. During the second quarter of 2024, the company reported adjusted EBITDA of $108 million, demonstrating strong operational efficiency despite a lower margin environment. Delek’s refining segment recorded a record throughput of 316,000 barrels per day, supported by the company’s focus on safe and reliable operations. The company’s Big Spring refinery showed notable improvement, achieving production margins of $8.92 per barrel, while the Krotz Springs refinery maintained a production margin of $7.02 per barrel. These figures indicate Delek US Holdings, Inc. (NYSE:DK) ability to optimize its refining operations and maintain a favorable cost structure.
Delek US Holdings, Inc. (NYSE:DK) strategic initiatives are further enhancing its financial position. The company recently announced the sale of its retail business for approximately $385 million, which will be used to strengthen its balance sheet and return value to shareholders. Delek also made a series of acquisitions, including the purchase of H2O Midstream for around $160 million in cash and $70 million in convertible preferred shares. This transaction is expected to be immediately accretive to EBITDA and free cash flow, further positioning Delek US Holdings, Inc. (NYSE:DK) as a key player in the midstream sector.
The company’s robust cost reduction efforts have led to over $100 million in savings, surpassing initial targets and making Delek structurally leaner and more profitable. Delek US Holdings, Inc. (NYSE:DK) commitment to shareholder returns is also evident, with the company increasing its dividend to $0.25 per share. This strong financial performance, combined with strategic acquisitions and a focus on cost optimization, makes Delek US Holdings, Inc. (NYSE:DK) US Holdings a compelling investment in the oil refining sector.
05. HF Sinclair Corporation (NYSE:DINO)
Number of Hedge Fund Holders: 30
HF Sinclair Corporation (NYSE:DINO) is a leading independent energy company involved in oil refining, making it a strong candidate for inclusion in any list of top oil refinery stocks to invest in. With a diverse portfolio that includes gasoline, diesel, jet fuel, renewable diesel, and specialty chemicals, HF Sinclair Corporation (NYSE:DINO) operates refineries across the U.S., primarily in Kansas, Oklahoma, New Mexico, Utah, Washington, and Wyoming. The company’s strategic geographic presence enables it to serve key markets in the Southwest United States, the Rocky Mountains, the Pacific Northwest, and neighboring Plains states. Additionally, HF Sinclair is involved in supplying fuel to over 1,500 Sinclair-branded stations, further highlighting its expansive market reach and brand strength.
In its Q2 2024 earnings report, HF Sinclair Corporation (NYSE:DINO) beat expectations with earnings per share (EPS) of $0.78, surpassing the expected $0.72. This reflects the company’s robust performance and ability to navigate a challenging economic environment. The company’s refining segment, which is its core business, delivered strong results with a notable increase in utilization rates and improved reliability, driven by reduced operating costs and completion of maintenance activities on time and within budget. HF Sinclair Corporation (NYSE:DINO) operating expenses were reported at $7.29 per throughput barrel, a significant improvement towards its near-term target of $7.25.
In terms of financial health, HF Sinclair Corporation (NYSE:DINO) reported a net income of $152 million for the second quarter and a total adjusted EBITDA of $406 million, underlining its profitability. The company returned $467 million to shareholders through dividends and share repurchases, reaffirming its commitment to generating value for investors. As of June 30, 2024, HF Sinclair Corporation (NYSE:DINO) had a strong liquidity position of $3.4 billion, including a cash balance of $866 million. This financial strength positions the company well to execute its growth strategies and manage its debt effectively, which stood at $2.7 billion with a low net debt-to-cap ratio of 14%.
With its focus on improving refinery utilization, expanding its renewable segment, and optimizing its existing assets, HF Sinclair Corporation (NYSE:DINO) is well-positioned to maintain its momentum and continue delivering value, making it a compelling stock choice within the oil refinery sector.
04. PBF Energy Inc. (NYSE:PBF)
Number of Hedge Fund Holders: 32
PBF Energy Inc. (NYSE:PBF) is a leading independent oil refining company that operates through two primary segments: Refining and Logistics. The company produces a variety of petroleum products, including gasoline, ultra-low sulfur diesel, jet fuel, lubricants, petrochemicals, and asphalt. With operations spanning the Northeast, Midwest, Gulf Coast, and West Coast of the United States, as well as Canada, Mexico, and international markets, PBF Energy Inc. (NYSE:PBF) is well-positioned to meet diverse fuel and petrochemical needs. This broad geographic footprint, coupled with an extensive product portfolio, makes PBF Energy Inc. (NYSE:PBF) a strong contender in the list of best oil refinery stocks to invest in.
PBF Energy Inc. (NYSE:PBF) Q2 2024 earnings report revealed challenges, but the company’s strong cash position and commitment to capital allocation strategies underscore its resilience and long-term growth potential. Despite missing on earnings expectations and reporting an adjusted net loss of $0.54 per share, the company achieved an adjusted EBITDA of $94.8 million. The primary reason for the earnings miss was the impact of extended maintenance activities at its East Coast and Mid-Con refineries, which reduced product yield and increased inventory levels.
The refining segment faced headwinds from declining crack spreads and tightening crude differentials, which led to lower margins during the quarter. However, with most of the planned maintenance activities completed and assets now operating at full capacity, PBF Energy Inc. (NYSE:PBF) is well-positioned to capitalize on improved refining margins in the second half of 2024. The company’s cash flow from operations remained robust at $425 million, benefiting from a $300 million working capital normalization.
In addition, PBF Energy Inc. (NYSE:PBF) focus on returning value to shareholders is evident through its share repurchase program and regular dividend payments. During Q2 2024, the company repurchased approximately $100 million in shares and paid a quarterly dividend of $0.25 per share. Since December 2022, PBF has repurchased over $914 million worth of shares, reducing its total share count by 16%.
With a healthy balance sheet, $1.4 billion in cash, and $1.3 billion in debt, PBF Energy Inc. (NYSE:PBF) is on solid financial footing. The company’s strategic capital allocation and efficient operations in the refining industry make it an attractive investment in the oil refinery sector.
03. Phillips 66 (NYSE:PSX)
Number of Hedge Fund Holders: 33
Phillips 66 (NYSE:PSX) is a major player in the oil refining industry, operating as an energy manufacturing and logistics company. Its refining segment converts crude oil and other feedstocks into a variety of petroleum products such as gasoline, diesel, and aviation fuels. With refining being one of its primary operations, Phillips 66 (NYSE:PSX) has established itself as a leading company in the sector. The stock’s robust financial performance, strategic investments, and commitment to operational excellence make it a compelling addition to the list of the best oil refinery stocks to invest in.
In its Q2 2024 earnings report, Phillips 66 (NYSE:PSX) exceeded market expectations, reporting earnings per share (EPS) of $2.31 against an expected $1.98. This solid performance was primarily driven by high crude utilization rates and an improved cost structure. The company’s refining operations achieved a utilization rate of 98%, the highest in over five years. Moreover, Phillips 66 (NYSE:PSX) demonstrated efficiency by reducing its refining costs by nearly $1 per barrel, achieving adjusted controllable costs of $5.93 per barrel.
One of the key highlights of the quarter was Phillips 66 (NYSE:PSX) strategic acquisition of Pinnacle Midstream, enhancing its midstream capabilities and bolstering its presence in the Permian Basin. The move is expected to contribute to stable earnings through high-quality, fee-based contracts. Additionally, the company successfully executed the sale of its 25% non-operated interest in the Rockies Express Pipeline, generating $685 million in proceeds, which helped Phillips 66 (NYSE:PSX) surpass its target of $3 billion from asset dispositions.
The company’s disciplined approach to capital allocation is reflected in its commitment to returning more than 50% of operating cash flows to shareholders through dividends and share repurchases. Since July 2022, Phillips 66 (NYSE:PSX) has returned over $11 billion to shareholders, with plans to reach $13 billion to $15 billion by the end of the year. This strong cash flow generation, coupled with prudent cost management and strategic investments, underscores the company’s financial strength and long-term growth prospects. Overall, Phillips 66 (NYSE:PSX) focus on maximizing shareholder value, expanding its asset base, and achieving operational excellence positions it well among the top oil refinery stocks to invest in.
02. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 45
Valero Energy Corporation (NYSE:VLO) stands out as one of the top oil refinery stocks due to its strong position in the oil refining industry. The company refines petroleum-based and low-carbon liquid fuels, distributing its products globally. Valero operates through three segments: Refining, Renewable Diesel, and Ethanol, with a primary focus on refining operations. It produces various refined products such as gasoline, diesel, jet fuel, and asphalt, distributing them through a network of outlets, including Valero, Beacon, and Diamond Shamrock. This extensive refining network, along with its focus on expanding renewable energy projects, solidifies Valero Energy Corporation (NYSE:VLO) standing in the sector.
In its Q2 2024 earnings report, Valero Energy Corporation (NYSE:VLO) reported better-than-expected results with earnings per share (EPS) of $2.71, surpassing the consensus estimate of $2.60. Despite a year-over-year decline in net income from $1.9 billion to $880 million due to lower refining margins, the company’s financial performance remained strong, driven by robust refining operations and a high throughput capacity utilization rate of 94%. The Refining segment reported $1.2 billion in operating income, showcasing the resilience of its core business amidst volatile market conditions.
Valero Energy Corporation (NYSE:VLO) renewable diesel and ethanol segments also contributed positively to its overall performance, with the Renewable Diesel segment achieving sales volumes of 3.5 million gallons per day. Although the segment’s operating income declined compared to Q2 2023 due to planned maintenance activities, Valero Energy Corporation (NYSE:VLO) commitment to renewable energy positions it well for future growth. Additionally, the company’s Ethanol segment produced 4.5 million gallons per day, reflecting a modest increase from last year.
Valero Energy Corporation (NYSE:VLO) strategic focus on optimizing refining assets and expanding its renewable fuel capabilities is evident in its ongoing projects, such as the Diamond Green Diesel sustainable aviation fuel project. This project is expected to be operational in Q4 2024, enhancing Valero’s competitive edge in renewable energy production.
Moreover, Valero Energy Corporation (NYSE:VLO) solid financial position, with $2.5 billion in net cash from operating activities and a debt-to-capitalization ratio of 16%, enables it to maintain a high dividend payout and share buyback program. This commitment to shareholder returns, coupled with a well-capitalized balance sheet, makes Valero Energy Corporation (NYSE:VLO) an attractive stock in the oil refinery sector.
01. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 50
Marathon Petroleum Corporation (NYSE:MPC) is a major player in the oil refining industry, and its strong position in the refining and marketing segment makes it a compelling addition to the list of oil refinery stocks. The company operates refineries across key U.S. regions, including the Gulf Coast, Mid-Continent, and West Coast. It refines crude oil into transportation fuels, petrochemicals, and other refined products. With its strategic geographical footprint, Marathon Petroleum Corporation (NYSE:MPC) has access to diverse markets and logistical networks, positioning it to capture strong margins and respond effectively to changing market dynamics.
Marathon Petroleum Corporation (NYSE:MPC) second quarter 2024 earnings report highlighted its solid financial performance, driven by high refining utilization rates and steady demand for refined products like gasoline, diesel, and jet fuel. The company reported adjusted earnings per share (EPS) of $4.12, surpassing market expectations of $3.09. This robust performance was underpinned by refining margins and cost efficiencies, which contributed to an adjusted EBITDA of $2 billion in the Refining & Marketing segment.
One of the key metrics demonstrating Marathon Petroleum Corporation (NYSE:MPC) strength is its refining utilization rate, which stood at 97% in Q2 2024. This high utilization rate allowed the company to process nearly 2.9 million barrels of crude oil per day, positioning it as a leader in the refining sector. Additionally, Marathon Petroleum Corporation (NYSE:MPC) refining operating costs were $4.97 per barrel, with the U.S. Gulf Coast region achieving even lower costs of $3.73 per barrel, showcasing the firm’s cost competitiveness.
The Midstream segment, primarily comprised of MPLX, also delivered strong cash flows, with $550 million in quarterly distributions to Marathon. This cash flow supports Marathon Petroleum Corporation (NYSE:MPC) capital return strategy, as the company repurchased $3.2 billion in shares during the quarter. Marathon’s disciplined approach to capital investment, focusing on high-return projects in refining and midstream, is expected to drive continued growth and value for shareholders.
Given its operational excellence, strategic investments, and strong financial performance, Marathon Petroleum Corporation (NYSE:MPC) is well-positioned to lead its peers in capital returns and deliver long-term value, making it a top choice among oil refinery stocks.
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