Valero Energy Corp Adjusting Estimates, Raise PT to $355

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Valero Energy Corp Adjusting Estimates, Raise PT to $355

Valero Energy Corp UBS Research

Our forecasts are primarily anchored on our 2026 and 2027 outlook, where we believe

earnings visibility remains relatively strong. As such, our current estimates assume a

gradual normalization of global product markets, including a near-term resolution of

ongoing Middle East disruptions. However, the duration of the conflict has already

exceeded initial market expectations, highlighting the inherent uncertainty surrounding

the timing of normalization. Should disruptions persist for an additional three to six

months, global product inventories could remain below historical norms for longer,

while trade flows and export availability remain constrained. Under such a scenario,

refining margins could remain elevated well into 2028, creating meaningful upside to

our current earnings assumptions.

Looking further out, we believe the trajectory of refining fundamentals in 2028 will also

be influenced by developments in the Russia-Ukraine conflict. While our base case

assumes a gradual easing of market dislocations over time, the conflict has persisted for

several years and continues to affect global energy and refined product flows. A

prolonged period of sanctions, logistical inefficiencies, and regional supply disruptions

could sustain tighter-than-normal product balances and keep marginal supply costs

elevated. In this environment, the industry's anticipated margin normalization may be

delayed, supporting refining margins above our current mid-cycle assumptions and

providing additional upside to our 2028 earnings forecasts.

More broadly, both conflicts reinforce the possibility that global refining markets remain

structurally tighter for longer than historical cycles would suggest.