Morgan Stanley declares ‘Golden Age of Refining’ as crack spreads hit records

Oil refiners worldwide are reaping historic profits as the Iran war's lingering effects on global fuel supplies combine with a Russian diesel export ban to push crack spreads — the measure of a refinery's profit margin — to record territory.

The NYMEX 3-2-1 crack spread, the benchmark for U.S. refinery profitability, hit an all-time high of $64.58 per barrel on July 8, according to Reuters data cited by Oilprice.com. In Europe, diesel refining margins surged past $60 per barrel after Russia announced a halt to diesel exports to address its domestic fuel crisis, worsened by Ukrainian drone strikes on Russian refineries.indexbox+1

Refiners Surge While Crude Stays Below Wartime Peaks

The dynamic has created a paradox for consumers: crude oil prices have come down from their wartime highs — Brent peaked around $126 per barrel in April before retreating — yet gasoline and diesel prices remain elevated. Veteran energy analyst Paul Sankey of Sankey Research, appearing on CNBC on July 9, pointed to refining margins as the culprit rather than crude oil itself. "Refining margins have gone through the top of the range here. It costs between $5 and $10 per barrel to refine for someone like Valero," Sankey said, according to 24/7 Wall St..journalrecord+3

Marathon Petroleum ↗ 0.76% has gained roughly 96% over the past year, while Valero Energy ↗ 0.38% has surged nearly 128%. HF Sinclair ↘ 1.05% reported first-quarter 2026 net income of $648 million, or $3.56 per diluted share, compared with a net loss in the year-ago period.247wallst+1

A 'Golden Age' for Asian Refiners

Morgan Stanley ↗ 0.17% has declared a "Golden Age of Refining," upgrading refiners across Asia and raising target prices. The firm lifted targets on Thai refiners Thai Oil, Star Petroleum Refining, and Bangchak Corporation by as much as 42%, maintaining overweight ratings on all three. Morgan Stanley projects global gross refining margins will remain 20-25% above mid-cycle averages, forecasting $14.3 per barrel in 2026. The firm also maintained overweight stances on Indian refiners including HPCL, BPCL, and Indian Oil Corporation.cnbctv18+1

Saxo Bank head of commodities Ole Hansen attributed the tightness to two factors: strong seasonal demand for products like gasoline and constrained crude availability as refineries struggle to replenish inventories depleted during the war. With global fuel stockpiles near multi-year lows across multiple countries, and Sankey warning that government intervention through windfall taxes or margin caps now poses a greater threat to the refining trade than any supply-side risk, the sector faces an unusual combination of record profitability and mounting political scrutiny.finance.yahoo+2