US oil refining stocks are heading towards their strongest annual performance on record, with the sector benefiting from tighter global fuel supplies, higher refining margins and disruptions to international energy markets.
The S&P 500 Oil and Gas Refining and Marketing Index has gained 136 per cent so far in 2026, according to market figures cited in the latest update. The performance is more than double the sector’s 65 per cent gain during the 2022 energy crisis.
If sustained, this year’s advance would surpass the sector’s previous strongest annual performances since 1996, including gains of 80 per cent in 2012 and 77 per cent in 2005.
Among the leading performers, Marathon Petroleum has gained 174 per cent, while Valero Energy is up 142 per cent and Phillips 66 has risen 117 per cent.
The rally has also extended to exchange-traded funds tracking the refining industry. The VanEck Oil Refiners ETF (CRAK) has climbed 65 per cent this year, putting it on course for its strongest annual performance since its launch in August 2015.
The surge comes amid tightening international supplies of refined fuels, particularly diesel and jet fuel, following disruptions to refining operations in Russia and the Middle East.
The US Energy Information Administration (EIA), in its October 2026 assessment, reported that US refineries operated at an average utilisation rate of 95 per cent during the third quarter, processing the highest volume of crude oil for that quarter since 2019.
Refining margins also strengthened during the period. The EIA reported that the average gasoline crack spread more than doubled compared with the same period last year, while distillate and jet fuel crack spreads almost tripled. Crack spreads measure the difference between the cost of crude oil and the wholesale value of refined products, providing an indication of refinery profitability.
However, the rally also comes with risks. Refining margins can change quickly as supply conditions, crude oil prices and fuel demand shift. Morningstar noted in July that elevated margins had supported share price gains, but warned that stretched valuations could leave refiners vulnerable if favourable conditions do not last.
For investors, the sector’s performance reflects how geopolitical tensions and disruptions to global energy supply can create opportunities for companies with the capacity to process and export refined fuels. Whether the gains can be sustained will depend largely on how long tight supply conditions and elevated refining margins persist.
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