Refining & Marketing: Marking the Crack Deck

Research evidence excerpt

Refining & Marketing: Marking the Crack Deck

Idea

June 12, 2026 04:01 AM GMT

Morgan Stanley & Co. LLCMRefining & Marketing | North America Joe Laetsch, CFA

Equity Analyst

Marking the Crack Deck Joe.Laetsch@morganstanley.comDaniel Kutz +1 212 761-8804

Dan.Kutz@morganstanley.com

Refining margins have eased from the mid-May peak but remain Devin McDermott

elevated vs. pre-conflict levels, with 2Q up ~85% Q/Q. Even with EquityDevin.McDermott@morganstanley.comAnalyst and Commodities Strategist +1 212 761-1125

a Strait of Hormuz reopening, cracks are likely to remain Zackary C Warden

Research Associate

supported by tight product inventories & stable demand trends, Zackary.Warden@morganstanley.com +1 212 761-4164

though we see this reflected in valuations.

Key Takeaways

Cracks have eased from May highs, though remain elevated vs pre-conflict levels,

with 2Q refining margins +85% Q/Q, supporting a ~55% YTD rally in the group. Refining & Marketing

North America

We expect cracks to remain elevated vs history even if flows normalize, Industry View In-Line

supported by tight product inventories, stable demand trends, & facility damage. What’s Changed

On updated fwd cracks, MSe 2Q and 2026 EBITDA for large-caps are ~5% above HollyFrontier Corp (DINO.N) From To

Price Target $69.00 $78.00

cons. On valuation, we estimate large-cap refiners trade at ~6.2x 2026 EV/

EBITDA. Phillips 66 (PSX.N) From To

Price Target $180.00 $196.00

On mid-cycle margins (MSe 2028), we estimate the large-cap group is currently

Delek US Holdings Inc (DK.N) From To

trading at ~9.2x EV/EBITDA on average, above the historical median of ~7.5x. Price Target $41.00 $45.00

We refresh our PTs (DCF & multiples), and update estimates for latest strip Marathon Petroleum Corp

prices through 2027.