Geopolitical conflicts often trigger immediate reactions in energy markets. And with conflict ongoing in the Middle East, even as the White House eyes a “takeover” of Cuba, traders are once again asking the same question: Will oil prices surge again — and if they do, who actually benefits?
In last Friday’s Market on Close livestream, Barchart’s Senior Market Strategist John Rowland, CMT, explained how global energy disruptions could impact oil prices, refining margins, and 2 key energy stocks investors should be watching.
The answer may surprise some traders. Because while many focus on the price of crude oil, the real opportunity may lie one step further down the supply chain.
The Strait of Hormuz: Why It Matters
Roughly 20% of the world’s crude oil (CLJ26) supply flows through the Strait of Hormuz, one of the most strategically important shipping lanes on the planet.
Any disruption in that region can ripple quickly through global energy markets, but the impact on the United States may be different than many assume.
Why the U.S. Is Somewhat Buffered
Unlike many global economies, the United States imports most of its crude oil from North American sources.
The largest suppliers include:
- Canada
- Mexico
- Venezuela
That means U.S. refiners are less dependent on Middle Eastern crude than many Asian or European markets. And that difference creates an interesting dynamic.
While global oil prices may spike due to geopolitical tensions, U.S. refiners may still access cheaper crude from regional sources.
The Real Opportunity: Refining Margins
John pointed out that energy investors should pay attention not just to oil prices, but to refining margins.
Refining margins represent the difference between:
- The cost of crude oil
- The price of refined products like gasoline, diesel, and jet fuel
And those margins have been rising sharply.
Why? Because global supply disruptions often affect refined fuels even more than raw crude.
That environment can create strong profitability for refiners.
2 Energy Stocks Positioned to Benefit
According to John, two U.S. companies are particularly well positioned in this environment – and they’re a pair of energy stocks that he flagged to viewers earlier this year.
#1. Valero Energy
Valero (VLO) is one of the largest independent refiners in North America and has significant exposure to Gulf Coast refining operations. Those refineries are well equipped to process heavy sour crude, including supply coming from Venezuela.
#2. Phillips 66
Phillips 66 (PSX) is another major U.S. refiner capable of handling discounted heavy crude. As global refining margins expand, companies like Phillips 66 may benefit from the spread between lower feedstock costs and higher refined product prices.
The Bottom Line
While many traders focus on the direction of crude oil prices, the bigger opportunity may lie in the refining margins created by global supply disruptions. If tensions persist and oil markets remain volatile, companies positioned along the refining chain could see meaningful benefits.
But as always, markets can shift quickly. A sudden resolution to geopolitical tensions or a reopening of shipping routes could change the outlook just as fast.
Watch this clip for John’s analysis:
- Stream the full Market on Close episode
- Explore energy markets and refinery stocks using Barchart tools
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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