U.S. Refinery stocks plummet to two-year lows amid new tariffs and fuel demand concerns

The announcement of new tariffs by President Donald Trump has led to a significant decline in U.S. refinery stocks, reaching nearly two-year lows. Major refiners such as Marathon Petroleum, Valero Energy, and Phillips 66 have collectively lost over $20 billion in market capitalization since the tariffs were unveiled. This downturn reflects growing investor apprehension regarding potential decreases in fuel demand and narrowing refining margins.​

Key points:

• Market Capitalization Decline: Marathon Petroleum, Valero Energy, and Phillips 66 have seen substantial reductions in their market values following the tariff announcement.​
• Crude Oil Futures Drop: Brent crude futures fell by 6.5% to $65.58 per barrel, while West Texas Intermediate (WTI) crude declined by 7.4% to $61.99 per barrel, marking the lowest closing prices in over three years.​
• Fuel Futures Also Affected: U.S. gasoline and diesel futures experienced approximately an 8% decline over the week.​

Analyst insights:

Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, highlighted that the implementation of retaliatory tariffs could lead to weaker global GDP growth, subsequently reducing oil demand growth, lowering oil prices, and compressing refining margins. Analysts from Rabo Bank echoed this sentiment, noting that the escalating trade war is prompting a reassessment of fuel demand projections.​

Impact on refining margins:

The refining sector is currently facing overcapacity issues, making margin recovery heavily dependent on demand growth. The global demand for gasoline is projected to peak this year at around 28 million barrels per day, influenced by the increasing adoption of electric vehicles and enhanced fuel efficiency, particularly in China. Diesel demand is also expected to decline after reaching 29 million barrels per day last year. Gelder anticipates that the new tariffs will not only hinder margin recovery but may also revert refining margins to levels seen in 2021.​

Stock performance of major refiners:

• Marathon Petroleum: Shares dropped by 6% to $121.07, the lowest since July 2023.​
• Valero Energy: Shares declined by approximately 8% to $104.69, the lowest since May 2023.​
• Phillips 66: Shares fell by about 8% to $98.81, the lowest since July 2023.​

The broader energy index also experienced a decline of around 6% on the same day.