US refining margins have reached levels few refiners have seen. Valero made a refining margin of $39.24 a barrel of throughput in the third quarter of 2026, against $13.14 a year earlier. Phillips 66 realised $38.00 a barrel and HF Sinclair $54.22. All three reported their results this week.
This analysis explains why margins are so high, what they are worth to the refiners and how long they could last.
How high are US refining margins?
The scale is unusual. Valero’s refining operating income reached $8.8bn in the quarter, on throughput of about 3.0mmbbl/d. After operating costs and depreciation, it kept $32.09 a barrel, against $5.86 a year earlier. Similarly, Phillips 66’s refining segment made $6.03bn before tax, nearly double the second quarter of 2026.
HF Sinclair shows the same pattern. Its adjusted refinery gross margin rose 183% from a year earlier. As a result, its refining segment’s adjusted EBITDA rose to $2.58bn, from $661mn.
Why US refining margins are so high
Two forces work together. The first is tight fuel supply. HF Sinclair pointed to the tight supply of transportation fuels and elevated crack spreads, while Phillips 66 said wider market cracks drove its margins. Diesel is the tightest product; see our analysis of the US heating oil reserve.
The second is cheap crude. US refiners buy heavy and domestic grades that trade well below Brent. In the third quarter of 2026, Mexico’s Maya traded $13.37/bbl below Brent, against $7.14 a year earlier, Valero’s data show. Western Canadian Select in Houston was $16.49 below, from $6.93. In other words, US refiners sell fuel at global prices but buy crude at a discount.
Volume adds to the gain. Phillips 66 ran at 98% of crude capacity, and Valero’s plants ran at near-record rates. In addition, HF Sinclair benefited from small refinery waivers granted by the US Environmental Protection Agency.
How long can the boom last?
In our view, margins stay high while Hormuz traffic stays disrupted, but not for years. First, Brent is now near $115, well above its third-quarter 2026 average of $91.61. Higher crude costs squeeze margins unless fuel prices keep pace. Indeed, Phillips 66’s marketing profit already fell as retail fuel margins shrank.
Second, new supply is coming. India’s refinery expansions should lift its diesel exports in 2027; see our analysis of India’s diesel exports. Third, a reopening of Hormuz would restore Gulf product exports and narrow crude discounts. Both would cut margins quickly.
Meanwhile, the refiners are banking the cash. Phillips 66 returned $2.8bn to shareholders and cut net debt by $3.8bn. Valero paid out 52% of its adjusted operating cash flow. That suggests they also treat the windfall as temporary. For what it means for integrated majors, see our BP sum of the parts analysis.
What to watch next
- Diesel cracks into winter, especially on the US East Coast.
- Heavy crude discounts for Maya and Canadian grades, the core of the US edge.
- Hormuz traffic, the biggest single risk to margins.
For the news, read our report on the Phillips 66 results.
Sources
- Valero Energy, Valero Energy Reports Third Quarter 2026 Results (incl. feedstock and per-barrel tables), October 2026: investorvalero.com
- Phillips 66, Phillips 66 Reports Third-Quarter Results, 28 October 2026: phillips66.com
- HF Sinclair, HF Sinclair Reports 2026 Third Quarter Results and Announces Regular Cash Dividend, October 2026: hfsinclair.com
- Business Standard, India’s diesel exports set to surge in 2027 on refining capacity boom, 27 October 2026: business-standard.com
