Time To Protect Profits In Refiner Longs
- with update at bottom: 7:30 AM ET 7/23.
“As Good As It Gets” Vibe
The refining margin printed $71 a barrel July 9th when WTIC was printing $75 and has since stayed in the high 60s as crude has moved up to $87 today.
This is the highest crack spread ever - even higher than the 2008 parabolic run in oil or the 100% advance in one year before the March 2022 Russian invasion of Ukraine.
Normal/long-term averages are ~$10–16/bbl (e.g., 2010–2021). Values above ~$15–25/bbl are considered strong; $30+ is exceptional; $50–60+ is extraordinary and rare.
And speaking of rare: check out the advance of the oil refinery stocks since the April 2025 bottom.
PBF delivered the strongest performance (+348%), followed by DINO (+251%) and VLO (+197%). My recommended longs were VLO & PBF as options were thickest.
This outsized run started from the April 2025 bottom into the new year when, in January, Trump staged a theatrical capure of Venezuelan President Maduro, and with it, Venezuelan oil.
Then February 28th, Trump-Netanyahu dropped bombs on Iran - and despite a ‘ceasefire’ announcement April 8th and MANY on-again, off-again theatrical ‘negotiation’ headlines - the writing was on the wall: the Memorandum of Understanding June 12th would not last and it didn’t. Two weeks later, conflict ensued and with it, nighly strikes and the realization of a prolonged Middle East War that threatens to broaden.
During the entirity of this 15 month period - which includes the June 2025 ‘bunker bombing’ by US on Iran to the current Feb-July 2026 protracted conflict in the war of choice by Trump - refiners have been printing money and I have been recommending long and strong to LaDucTrading clients since VLO was $100 at its 400W EMA!
Only twice did I warn for digestion/pullback and both lasted only a month: Dec 2025 and again June 2026. Every live trading room session and every video snippet on our LaDucTrading YouTube channel was on repeat: stay “TREND” bullish.
I can still see the bullish arguments - especially with potential for crude to get and stay above $91 in an oil shock and energy crisis - but I am seeing OptionTeller flow that is warning, AND a crack spread that looks like an AI earnings report: “As good as it gets”.
Bullish Arguments Remain And Yet…
Technically, VLO PBF MPC PSX DINO and the CRAK ETF have done nothing wrong, as crude continues to look bullish into $91 and potentiall above! The energy complex has also been a fabulous proxy for inflation and the theme I pushed January in that:
“Boomer stocks are the new inflationary assets”.
Client Brian coined the term around March that bears repeating:
“There is no EV equivalent for jet fuel...”
This comment was referring to the actual and threatened shortage of jet fuel during the War on Iran in March. This helped my continued bullish thesis along with the fact that refineries and tankers were/are being targeted for collateral damage in the wars - both Ukraine and Iran - helping the crack spreads to rise.
Add to that, the Strait of Hormuz and now Bab-el-Mandeb are closed with nearly 10% of global refinery capacity offline due to war damage, fires from sabotage, planned and unplanned outages.
“A fire has temporarily shut Pennsylvania’s Trainer refinery. Germany’s Gelsenkirchen refinery, the country’s 5th largest, is also offline after a fire. Nigeria’s Dangote refinery is reportedly operating at 55% because of equipment problems, reducing a key source of jet fuel for Europe.” Mason Hamilton
Add to that, the sector has a fundamental tailwind, still - even if it is processing/selling illegally-seized Venezuelan oil: (charts h/t @TheValueist )
Don’t forget: we are approaching hurricane season - which is seasonally bullish… refiners!
But I can’t unsee the change in OptionTeller option flow that is appearing in our favorite “boring but profitable” refiner longs.
Price printed $326 today, July 22, 2026, and I noticed a slew of protection entering VLO last week, with the largest being of considerable size.
I want to remind the last time I showcased OptionTeller flow in support of my bullish refining thesis, and specifically VLO: June 26th when VLO was fast-approaching my SWING LONG price target of $260. [My price target for VLO given back in March was $270.]
As I showed in June, the flow for VLO was still overwhelmingly BULLISH when sorting by premium.
Fast forward, and I can use OptionTeller to identify the largest position entered in the past month for VLO: July 16 for $12.7M in premium in directional $280 puts bought.
Now that I see it, I can track that trade in particular. I can use our-newly introduced AI prompting engine to dig in deeper to the aggregate flow or compare with other stocks/sectors in the oil & gas space.
Point is: We have lots of options to leverage this customer-trade-focused option research platform that does the matching logic and relevance scoring for us - to help identify new trades, help stick with old ones longer, and protect against coming volatility.
In the case of oil refiners, it’s time to reign in the chasing of “as good as it gets” crack spreads and protect profits on these outsized runs.
Good morning!
7:30 AM ET 7/23/26: Client Brian reminded me of a very important point:
“lol everyone looking for them to come back to the market and now selling into it”
I tell you, that’s the money quote.
Not only is China NOT BUYING, but they are SELLING OIL into the market as yet another way to bypass the US petrol dollar. And I am sure there are eager, hungry countries in South East Asia very welcome for the stuff.
A final point by Client Brian (who is in the refiner space and long-time client of LaDucTrading):
“Nat gas … Going to be a surprise expense to refiners next year.”
Yes, he sees Nat gas going higher in price over the next five years which will obviously be a headwind to refiners bottom line.
8:30 AM ET 7/23/26: Bloomberg article worth highlighting:
In addition, refiners are running near max capacity which is raising the likelihood that equipment failures amplify risks:
From a recent Bloomberg article:
“Nationwide, refiners have been running at or above the 95% utilization rate that’s widely regarded as full capacity for almost two months, government figures showed. In at least one region, the Rocky Mountains, fuelmakers have surpassed the 100% marktwice in the past few weeks, a pace that even the refining industry’s main lobbying group warns is untenable.
Churning along at maximum rates increases wear and tear on the units that pressurize, heat, crack and reformulate crude oil components to make gasoline, diesel, jet fuel and other feedstocks crucial to the smooth operation of the world’s largest economy. Throw in a Gulf Coast hurricane or Great Lakes blackout and fuel production in those places can screech to a halt.”
The point is clear: refiners are deferring routine maintenance work to capture sky-high fuelmaking margins.
Ironically, that only adds fuel to the fire of higher energy prices:
“Any major outage could have an outsized impact because domestic fuel stockpiles are unusually low. Inventories have been strained by robust demand for US diesel to replace production lost to the conflicts in Russia and the Persian Gulf, and a drop in gasoline imports to a 29-year seasonal low.”