Refiners earnings preview – Flowing thru the crack strip generates little upside

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Refiners earnings preview – Flowing thru the crack strip generates little upside

k forecast changes bring our naomi.marfatia@bofa.com

2Q26-FY28 estimates to around the high end of the cons range for our refining

coverage. Still, this results in sub-10% vs current share prices for the Big 3 refiners.

As war extends, back-end crack futures grind higher Exhibit 1: POs raised across the board Per share figures

The RINs-adjusted NYMEX-Brent crack spread strip for 2027 and 2028 has increased

essentially every month since the Iran War began, sitting around $22.50/bbl for 2027

and $18.40/bbl for 2028. The rising strip is the basis of our Price Deck’s commodity Prior Current Rating

forecasts, and directly raises refiner valuations as a result. The fuel inventory drawdown DK 34 50 U/P

/ restocking time grows the longer transit in the Strait of Hormuz remains encumbered, MPC 260 319 Neutral

PBF 30 53 U/Pso the longer US-Iran conflict lasts, the higher outer yr crack spread contracts should

PSX 176 213 Neutral

continue to rise. SU CA$72 CA$94 Neutral

A smaller headwind: Physical crude basis VLO 256 318 Neutral

Channel checks indicated that the Dated Brent-front month Brent premium (peaking in Source: BofA Global Research Note: U/P = Underperform

April) was a wider spread phenomenon across the US, weighing on refining capture even BofA GLOBAL RESEARCH

outside the North Atlantic. Encouragingly for 3Q26, Dated Brent now trades below front

month, suggesting physical premia have since subsided in a way that should support

3Q26 capture rates so far. All refiners are a least somewhat affected by this Glossary

phenomenon (likely more coastal operators VLO/PBF/PSX), although MPC’s indicator Bbl: barrel

already accounts for backwardation via its market structure adjustment.