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The United States is seeking to buy up to three million barrels of oil for delivery in January 2024 to replenish the country’s strategic petroleum reserve, the Department of Energy said on Monday.

“This is the second solicitation for January 2024 delivery as DOE aims to purchase oil when it can purchase at a good deal for taxpayers,” it said in a statement. Last month the administration said it hoped to buy 6 million barrels of crude oil for delivery in December and January.

Reuters, David Ljunggren, November 6, 2023

In this piece, we will take a look at the 11 best oil refinery stocks to buy. If you want to skip our overview of the dynamics within the oil industry and recent developments, then take a look at the 5 Best Oil Refinery Stocks To Buy.

The modern day oil industry is responsible for fueling global transportation, industrial, and energy networks. Whether it’s electricity for large scale cloud computing data centers, cargo ships, aircraft, or power generation plants, humanity’s reliance on fossil fuels is responsible for both economic growth and pollution.

Within the oil sector, the same and different companies are present at key stages of the supply chain. After crude oil is extracted from the ground, it must be processed to bring it up to standard for consumption by machinery. Oil extracted from the ground is transformed into a variety of different end products, such as gasoline, kerosene, diesel, and heavy fuel oil. This transformation occurs in an oil refinery, which is one of several refineries that are responsible for converting cruder raw inputs into high grade products. Some examples of refineries include sugar and metal refineries.

Oil refineries are operated by large oil giants such as Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) and smaller companies with isolated business operations. Additionally, the heavy capital expenditure required to set up refineries often requires government involvement or financing of mega oil refining projects. For instance, Indian billionaire Mukesh Ambani and his petrochemical, retail, media, and telecommunications behemoth Reliance Industries Limited (NSE:RELIANCE.NS)’s oil refinery in the Indian state of Gujarat was partly built by a $500 million loan guarantee by the official credit export agency of the United States of America, the Export-Import Bank of the United States. Similarly, the Indian government has allocated $3.6 billion for oil refineries as part of its 23/24 budget.

These massive capital costs create high barriers to entry in the oil refinery business, leading to the being dominated by a few private sector firms or large state owned enterprises. For instance, consider the data that we gathered as part of the coverage of the Top 20 Largest Refineries In The World. While Reliance’s Gujarat oil refinery is the largest in the world and privately owned to boot, the largest oil refineries in Venezuela, the United Arab Emirates, Kuwait, Saudi Arabia, and China are owned by state enterprises. However, in South Korea, the U.S., and Taiwan, oil is refined by private companies which include some of the largest oil companies in the world.

Zooming out to take a broader look at the global oil refining industry, it is naturally one of the biggest in the world. According to data from Skyquest Technology, the oil refining industry was worth $1.49 trillion in 2021 and grew to $1.5 trillion by the end of 2022. From then until 2030, it can grow at a compounded annual growth rate (CAGR) of 5% to be worth an estimated $3.7 trillion by the end of the decade. Refineries sit at the very root of not only the oil industry but also the gas industry, since without them, the modern day supply chain for fossil fuels cannot function. Therefore, it’s unsurprising that the $1.5 trillion market value of the oil refinery industry is a sizeable fraction of the total value of the global oil industry. This was estimated to sit at $7.3 trillion by 2022 end. Broadly speaking, these two data points show that the oil refinery industry accounted for roughly 21% of the global oil industry in 2022. Some other sectors that account for the remaining share of the oil sector include extraction, midstream transportation and storage, marketing, and retail operations at the pump or the port.

Zooming back in, some of the biggest pure play oil and gas refining and marketing companies that trade on American stock exchanges are Marathon Petroleum Corporation (NYSE:MPC), Phillips 66 (NYSE:PSX), and Valero Energy Corporation (NYSE:VLO). Like the broader corporate world, it’s earnings season in the oil refinery sector, and these three giants have also reported their financial results. Starting from Marathon Petroleum Corporation, the firm’s profit for the third quarter of 2023 beat analyst estimates by sitting at $8.14 in adjusted net income per share. Similarly, Valero’s $7.49 adjusted net income per share also surpassed analyst estimates. Phillips 66 however suffered from low refining margins as its adjusted earnings per share of $4.63 was thirteen cents lower than the consensus forecast.

The broader oil market has been quite jittery these days because of fresh conflict in the Middle East, and while oil prices have remained relatively stable, the conflict between Israel and Palestine risks impacting oil supply from West Asia. On this front, Valero Energy Corporation (NYSE:VLO)’s chief executive officer Gary Simmons believes that the U.S. can relieve some of the risks to its oil imports if sanctions against Venezuela are relaxed. Venezuelan oil is sanctioned through actions against the state owned PDVSA, and Simmons shared in recent earnings call that an ease in sanctions can lead to 250,00 barrels of daily oil supply being diverted from the Far East to the U.S.

With this context, let’s take a look at the best oil refinery stocks to buy. The top three oil refinery stocks in this list are Marathon Petroleum Corporation, Valero Energy Corporation, and Phillips 66.

An aerial view of an oil and gas refinery, with its tall smoke stacks and complex piping.

Our Methodology
To compile our list of the best oil refinery stocks, we narrowed our focus from the broader oil industry to firms that limit themselves to oil refineries. For instance, while oil mega giants such as Saudi Arabian Oil Company (TADAWUL:2222.SR), Exxon Mobil Corporation, Exxon Mobil Corporation and Shell plc also operate refineries, they are excluded from the list since they are not pure play oil refinery companies.

A list of the 21 largest oil refining firms was initially compiled and then these were ranked by the number of hedge funds that had invested in them as of Q2 2023 end. Out of these, the top oil refining stocks are as follows.

11 Best Oil Refinery Stocks To Buy
Adams Resources & Energy, Inc. (NYSE:AE)
Number of Hedge Fund Investors in Q2 2023: 3

Adams Resources & Energy, Inc. (NYSE:AE) is a backend oil refinery company that provides raw oil to refiners. The firm is due to report its third quarter earnings in November, and analysts have set a 15 cent EPS estimate.

Three out of the 910 hedge funds tracked by Insider Monkey were the firm’s investors during Q3 2023. Adams Resources & Energy, Inc. (NYSE:AE)’s largest hedge fund investor is Jim Simons’ Renaissance Technologies as it owns $6.9 million worth of shares.

Adams Resources & Energy, Inc. (NYSE:AE) joins Valero Energy Corporation (NYSE:VLO), Marathon Petroleum Corporation (NYSE:MPC), and Phillips 66 (NYSE:PSX) in our list of the top oil refinery stocks to buy.

Aemetis, Inc. (NASDAQ:AMTX)
Number of Hedge Fund Investors in Q2 2023: 7

Aemetis, Inc. (NASDAQ:AMTX) is a biodiesel company that converts agricultural products into the fuel. The firm has a strong presence in India, with its subsidiary landing another multi million dollar deal with Indian OMCs in October 2023.

As of June 2023, seven hedge funds out of the 910 part of Insider Monkey’s research had held a stake in Aemetis, Inc. (NASDAQ:AMTX). Todd J. Kantor’s Encompass Capital Advisors is the company’s biggest investor out of these through its $13.2 million investment.

CVR Energy, Inc. (NYSE:CVI)
Number of Hedge Fund Investors in Q2 2023: 14

CVR Energy, Inc. (NYSE:CVI) is an Icahn Enterprises subsidiary and it refines oil into gasoline and other similar products. Its third quarter financials were quite a striking set of results as they saw the firm grow its net income from the year ago quarter’s $93 million to a whopping $353 million in Q3 2023.

14 out of the 910 hedge funds tracked by Insider Monkey had invested in the firm during the previous quarter. CVR Energy, Inc. (NYSE:CVI)’s largest hedge fund investor is Carl Icahn’s Icahn Capital LP due to its $2.1 billion investment.

Vertex Energy, Inc. (NASDAQ:VTNR)
Number of Hedge Fund Investors in Q2 2023: 17

Vertex Energy, Inc. (NASDAQ:VTNR) is an American company headquartered in Houston, Texas with motor oil and other refineries. Its operational outlook for the third quarter created quite a stir in October when Vertex Energy, Inc. (NASDAQ:VTNR) revealed that the throughput in its facilities for the third quarter would exceed the high end of its previous guidance by three thousand barrels per day.

During this year’s second quarter, 17 out of the 910 hedge funds part of Insider Monkey’s database had bought and owned Vertex Energy, Inc. (NASDAQ:VTNR)’s shares. The firm’s biggest shareholder in our database is Adam Usdan’s Trellus Management Company as it owns 2.1 million shares that are worth $13.2 million.

Delek US Holdings, Inc. (NYSE:DK)
Number of Hedge Fund Investors in Q2 2023: 19

Delek US Holdings, Inc. (NYSE:DK) is a semi diversified oil company with a sizeable refining division. The firm’s shares have done well on the market over the past six months as they are up by 27%. However, analysts seem to be unimpressed, as the shares are rated Hold on average.

After digging through 910 hedge funds for their June quarter of 2023 shareholdings, Insider Monkey discovered that 19 were the firm’s investors. Delek US Holdings, Inc. (NYSE:DK)’s largest investor out of these is Ken Fisher’s Fisher Asset Management as it owns $31 million worth of shares.

Par Pacific Holdings, Inc.
Number of Hedge Fund Investors in Q2 2023: 21

Par Pacific Holdings, Inc. (NYSE:PARR) is a small oil refining company with three facilities under it belt. The firm expanded its oil refining portfolio in June 2023 as it bought an oil refinery previously owned by Exxon Mobil in Montana.

For their second quarter of 2023 shareholdings, 21 out of the 910 hedge funds tracked by Insider Monkey had held a stake in Par Pacific Holdings, Inc. (NYSE:PARR). David Rosen’s Rubric Capital Management owns the biggest stake among these, which is worth $71 million and comes via 2.6 million shares.

Marathon Petroleum Corporation (NYSE:MPC), Par Pacific Holdings, Inc. (NYSE:PARR), Valero Energy Corporation (NYSE:VLO), and Phillips 66 (NYSE:PSX) are some top oil refinery stocks being bought by hedge funds.

Yahoo Finance, Ramish Cheema, November 5, 2023

Houston-based Enterprise Products Partners is investing $3.1 billion into its natural gas liquids (NGL) operations, building a pipeline, adding new plants to process natural gas, and switching an oil pipeline back to an NGL pipeline.

The company said the projects will support the continuing production growth in the Permian Basin of west Texas and southeastern New Mexico. The company forecasts production growth in the prolific resource play to increase by more than 700,000 B/D in 2023 and grow by about 1.5 million B/D for a 3-year period ending in 2025.

Enterprise said it sees production growth increasing by up to another 15%, or greater than 1 million B/D by the end of 2030, with NGL production from the Permian potentially growing by more than 500,000 B/D to nearly 4 million B/D by the end of 2030.

Enterprise’s Co-Chief Executive Jim Teague said that the organic investments are needed to “facilitate the next phase of Permian production growth and will also complement our expansions of downstream pipelines and marine terminals to deliver energy products to growing domestic and international markets.”

The company will build the 550-mile-long Bahia NGL pipeline capable of transporting up to 600,000 B/D of NGLs from the Delaware and Midland basins to the company’s fractionation complex in Chambers County, Texas.

The pipeline includes a 24-in.-diameter segment from the Delaware Basin, connecting to a 30-in.-diameter segment from the Midland Basin to the fractionation complex. The wholly owned pipeline could begin operation in the first half of 2025, the company said.

To provide incremental NGL transportation service until the Bahia Pipeline is completed, the company said it initiated a conversion of the Seminole Pipeline, which carries up to 210,000 B/D of crude oil, back to NGL service in December 2023.

The pipeline began transporting crude oil in the second quarter of 2019 and was then known as the company’s Midland-to-ECHO 2 crude oil pipeline. Before 2019, the Seminole Red Pipeline was in NGL service, the company said.

Enterprise is also building two natural gas processing plants and a fractionation unit. The natural gas processing plants—the Mentone 4 and the Orion—will service the Delaware and Midland basins, respectively. Construction has begun on both plants, with each having the capacity to process more than 300 MMcf/D of natural gas to extract more than 40,000 B/D of NGLs.

The company is adding a fractionation unit at its Chambers County complex. The plant will have the capacity to fractionate up to 195,000 B/D of NGLs, and a new deisobutanizer unit will be able to separate up to 100,000 B/D of butanes.

JPT, Jennifer Presley, November 11, 2023

Despite ambitious decarbonisation targets, issues related to energy transition governance, regulations and flexibility markets hinder progress, according to a new report.

Despite having ambitious decarbonisation targets, the UK faces significant challenges in achieving them.

That’s according to the Energy Transition Readiness Index (ETRI) 2023, which suggests energy transition governance, regulatory issues and flexibility market concerns contribute to investment uncertainty and impede renewable energy deployment in the UK.

The report emphasises the need for clear governance and regulatory stability to attract investors and accelerate the energy transition.

The UK ranks ahead of several European countries in the ETRI but lags in terms of flexibility market development, crucial for balancing high-renewable grids.

The ETRI 2023, produced by the Association for Renewable Energy and Clean Technology (REA) and sponsored by Eaton and Foresight Group, assesses electricity markets in 14 European countries.

While the UK has improved its overall ranking, it faces challenges in providing fair, transparent and accessible flexibility markets.

Flexibility is vital for balancing renewable grids as coal and gas generation declines.

However, the UK’s progress in flexibility markets is not comprehensive or fast enough, according to the report.

Survey respondents suggested that introducing measures similar to the US Inflation Reduction Act would accelerate energy transition progress in the UK.

The REA stresses the severe financial consequences of slowing the energy transition.

ETRI 2023 recommends creating open markets for low carbon flexibility assets, prioritising flexibility market reforms and addressing technology and process barriers.

Energy Live News, Dimitris Mavrokefalidis, November 8, 2023

Oil traders will pay premiums for the annual supply of most grades of Middle East crude in 2024, trade sources said, on concerns over supply from the region after the Israel-Gaza conflict heightened geopolitical tensions.

The annual deals between trading firms purchasing from producers and equity holders of Middle East crude were mostly concluded by the start of this week, nearly a month since the conflict between Israel and Hamas militants broke out, which has sparked fears of a contagion in the region and made global oil prices volatile.

The Middle East accounts for a third of global oil production.

Volatility in oil markets may have driven up prices for some of the cargoes sold in these annual deals, one trader said.

While premiums for most of the grades held steady, some of the Murban and Oman cargoes with 5% operational tolerance had been sold at steep premiums of 30-35 cents a barrel to their respective official selling prices (OSPs), the sources said.

Operational tolerance is the percentage volume that the buyer or the seller could adjust during the loading of the cargo, depending on demand and shipping logistics.

For cargoes with an operational tolerance of 0.2%, Abu Dhabi’s flagship Murban crude are priced at between 10 and 12 cents a barrel to their OSP while Oman was sold at premiums of 4-5 cents a barrel, the sources said.

Another Abu Dhabi light grade Das, with the same operational tolerance level, was traded at premiums between 1 and 7 cents to its OSP, one of the sources said.

Supply of Upper Zakum crude, the medium Abu Dhabi grade, swung between small discounts and small premiums to its OSP for cargoes with 0.2% operational tolerance, the sources said.

Reuters, Florence Tan, November 10, 2023

U.S. crude oil refiners this quarter will pull back from red-hot summer run rates as weak gasoline margins and plant overhauls cool operating goals, according to company statements and oil analysts.

Refinery executives are aiming for low-90s utilization rates this quarter after running in the mid- to upper 90% range most of the year. A pullback for seasonal maintenance and a greater shift to producing distillates have reduced production, according to company executives, analysts and U.S. government data.

Production will be enough to keep gasoline prices tame with demand weaker than the production trims, said analysts. Refiners have kept producing gasoline at high rates to supply more distillates. Plants generally make two barrels of gasoline and one of diesel for every three barrels of crude oil processed.

“Guidance has been generally within our expectations of seasonally softer levels due to the pullback in gasoline demand,” said Matthew Blair, head of refiners, chemicals & renewable fuels research at investment firm Tudor, Pickering, Holt & Co.

AAA said on Thursday that gasoline prices have fallen 37 cents in the last month to a national average of $3.44 a gallon as gasoline demand continued to decline.

Last week, the U.S. Energy Information Administration (EIA) reported the latest drop in gasoline demand from 8.86 million barrels per day (bpd) to 8.7 million bpd.

Some companies, notably second-largest Valero Energy , aim to continue high production to capture jet fuel and other distillate demand. Valero’s 14 refineries will operate between 93% and 96.5% of combined crude oil capacity of 2.7 million bpd. HF Sinclair also aims to run slightly hotter this quarter than last with plant turnarounds completed.

Marathon Petroleum, the largest U.S. refiner with 13 domestic plants processing 2.9 million bpd, said it plans to operate at 90% capacity, down from 94% last quarter.

Phillips 66, the fourth largest refiner, said it would operate in the low 90% range, down from 95% in the third quarter.

“Ninety to 91% is where they will operate,” said John Auers, managing director of Refined Fuels Analytics. U.S. refiners are emphasizing diesel production, which has higher profit margins, as they emerge from overhauls, Auers said.

Refineries can shift between 5% and 10% of their production to emphasize either distillate or gasoline production.

Distillates earned about $1.10 a gallon in August while gasoline brought in 80 cents a gallon, according to the EIA.

“It is the diesel that’s carrying the day,” said Andrew Lipow, president of consultancy Lipow Oil Associates. He expects fourth quarter refinery utilization in “excess of 90%” of capacity.

Reuters, Erwin Seba, November 15, 2023

Many voters think of President Biden as a green energy champion who wants to put fossil fuels out of business. But if you look at the financial performance of oil and natural gas companies under Biden’s presidency, you might think he’s their biggest booster.

Energy has been the best-performing sector during much of Biden’s presidency, which is now fueling a mega-merger consolidation sweep among some of the world’s biggest energy companies.

ExxonMobil announced plans to buy driller Pioneer Natural Resources for $64 billion on Oct. 11, prompting Chevron to bid $53 billion for Hess on Oct. 23. More deals are possible as huge energy firms hustle to lock in premier drilling sites as the point of “peak oil”—maximum global demand for the commodity, followed by a gradual decline — comes into view, perhaps within the next decade.

The Exxon and Chevron deals are both all-stock transactions. That’s possible because shares of America’s two largest energy firms have soared during the past two years, giving the acquirers plenty of headroom for big purchases without having to tap cash or borrow.

Big Oil has been thriving, of course, at the same time Biden is overseeing the biggest green energy push in American history. The 2022 Inflation Reduction Act Biden signed includes green energy incentives that could total more than $1 trillion. Private sector firms are applying for those incentives at three times the rate budgeters expected last year. One consequence is a boom in the construction of factories for electric vehicle components and other green energy gear.

This might sound like a set of schizophrenic developments in the US energy sector, with a jacked-up fossil fuel industry threatening Biden’s green energy push (or vice versa). But it’s not. Big Oil is enjoying a heyday now in part because it’s rebounding from lean times. And while Biden clearly favors renewables over carbon, he has also learned that ample stocks of fossil fuels will be needed for years to keep consumer energy costs down and prevent voters from revolting.

It’s conventional wisdom that oil and gas firms are always rolling in money. But not really. In fact, as the following chart shows, energy sector returns have lagged many other sectors since 2010. During the last 10 years, energy was the worst-performing sector half the time, in terms of stock performance among the 11 major industries represented in the S&P 500 stock index.

Many Americans think gasoline and other energy prices were lower under President Trump than they’ve been under Biden. That’s mostly true — but not because of anything Trump or Biden did. One big reason prices were low from about 2014 through 2020 is that energy firms were overproducing and sacrificing profits as a result. As the shale drilling revolution got underway, many energy firms put profits aside as they invested aggressively in new facilities, in order to gain market share. The assumption was that profits would follow, eventually. As a result, energy investors willing to endure tiny profits or even losses basically subsidized the low cost of gasoline and other forms of energy for consumers.

COVID upended that equation. Oil prices plunged so deeply in 2020 that they briefly turned negative. Energy sector stocks in the S&P 500 lost 37% that year, while the broader index gained 16%, for an underperformance of 53 percentage points. Hundreds of energy firms went bankrupt and the mighty Exxon lost a staggering $22.4 billion.

That washout changed the whole industry. Investors and lenders began to demand short-term returns instead of tolerating losses in exchange for growth. Oil prices climbed off the floor as the global economy recovered from COVID. Then came Russia’s invasion of Ukraine in February 2022, which added a fear premium to oil prices for much of the year.

Yahoo Finance, Rick Newman, November 6, 2023