The U.S. oil market is currently witnessing significant volatility, with West Texas Intermediate crude prices surging from $66 to over $100 per barrel in recent months, and Brent crude prices climbing from $71 to $119. This shift has occurred amidst geopolitical tensions, particularly a recent conflict with Iran affecting the Strait of Hormuz, which carries approximately 20% of the world’s oil supply. Notably, the United Arab Emirates has announced its exit from OPEC, a major event for the global oil supply structure.
Refining profits are also on the upswing, indicated by an expanding “crack spread,” which measures the profitability of refiners. Presently, refiners are purchasing crude oil at lower prices while selling gasoline and diesel at prices reflective of over $106 crude. Additionally, a backwardation in oil futures suggests that the market anticipates tight near-term supplies, highlighting the urgency for immediate delivery among traders.
These two signals—the crack spread and backwardation—indicate a favorable environment for refining stocks, suggesting potential investment opportunities as the energy market remains under stress. Investors focusing on refiners and domestic producers might benefit from this volatility.
5 Stocks Our Experts Predict Could Double In the Next Year
By submitting your email, you'll also get a free pivot & flow membership. A free daily market overview. You can unsubscribe at any time.
