Refiners Lead 2026 Oil Stock Picks as Margins Jump 50%

Refiners have become 2026's standout oil stock picks as gasoline and diesel prices outpace crude, with Valero Energy and Marathon Petroleum each more than doubling this year while Brent crude holds near $87 a barrel.

Morgan Stanley raised its price target on Chevron to $218 from $210 on Aug. 19, reaffirming an overweight rating, as the firm adjusted energy-sector estimates to reflect 2026 strip prices and surging refining margins. Integrated energy companies have not yet rallied as much with the soaring refining margins as the pure-play refiners, the firm said.

The margin expansion traces to supply. The Iran war and Ukrainian attacks on Russian energy infrastructure have removed millions of barrels of refined products such as gasoline and diesel from global markets daily, pushing refined-fuel prices up faster than the crude refiners process. Brent crude is up about 50 percent in 2026, while gasoline and diesel have risen more sharply. WTI crude traded at $81.31 a barrel, up 0.1 percent, while Brent slipped 0.2 percent to $86.91, after the EIA reported a 17.4 million barrel weekly build in U.S. crude stocks.

The backdrop favors companies with low production costs and resilient balance sheets over growth-at-any-cost drillers. U.S. shale output is growing more selectively, with producers emphasizing capital discipline over volume growth, and most analysts expect oil prices to remain range-bound rather than surge dramatically. That has pushed the Zacks Rank #1 (Strong Buy) oil stock list — HF Sinclair, Delek US Holdings, Par Pacific, Valero Energy and NGL Energy Partners — heavily toward refiners and midstream operators that convert the margin surge into cash returns.

Refiners Convert Margin Surge Into Cash Returns

The divergence between crude and refined-product prices has widened crack spreads — the difference between what refiners pay for crude and what they earn selling gasoline and diesel — to levels that have made downstream operators the sector's biggest winners. Marathon Petroleum and Valero Energy posted some of the week's biggest gains through Aug. 14, rising 20 percent and 15 percent respectively, according to Dow Jones data. Tight global diesel supply remains the most bullish aspect of the market, with refined products moving through the Strait of Hormuz at only a fraction of normal volumes even as crude flows recover.

Chevron, the largest U.S. integrated producer, hit an all-time peak earlier this year and has surged more than 35 percent since the start of 2026, supported by high energy prices and strong earnings during the Middle East disruptions. The company delivered its highest quarterly profit in at least six years in the second quarter, and its acquisition of Hess granted access to more than 11 billion barrels of oil equivalent of discovered recoverable resources in Guyana. Chevron's lower Middle East production relative to peers reduces its exposure to the regional conflict while still allowing it to benefit from high crude prices.

Five Strong-Buy Oil Stocks for August

Zacks' top-rated oil stocks for August all carry a Rank #1 (Strong Buy), reflecting favorable earnings estimate revisions, with Style Scores of A for Value and Growth reinforcing the fundamental case. The list spans refiners and midstream operators:

• HF Sinclair (DINO), up 38.98 percent over 12 weeks, trades at 7.98 times forward earnings with projected EPS growth of 134.23 percent. Its refining, midstream, marketing and renewable fuels operations give multiple avenues for cash generation.
• Delek US Holdings (DK), up 54.11 percent, trades at 6.57 times forward earnings. Its Enterprise Optimization Plan targets at least $220 million of annual free cash flow improvement.
• Par Pacific (PARR), up 36.63 percent, trades at 3.62 times forward earnings with projected EPS growth of 182.18 percent. Its 219,000-barrel-per-day refining system and multimodal logistics support margin capture.
• Valero Energy (VLO), up 44.07 percent, trades at 8.52 times forward earnings with projected EPS growth of 282.87 percent. Its St. Charles FCC optimization is expected to lift high-value output.
• NGL Energy Partners (NGL), up 0.89 percent, trades at 12.27 times forward earnings. Its 81-mile LEX II extension should deepen its Delaware Basin infrastructure footprint.

The Zacks Rank is a proprietary stock-rating model that uses trends in earnings estimate revisions and EPS surprises to classify stocks into five groups. Rank #1 (Strong Buy) stocks have averaged a 23.94 percent annual gain from January 1988 through July 6, 2026, more than double the S&P 500's 11.55 percent.

For investors, the refining margin surge is unlikely to persist indefinitely — 2028 consensus EPS estimates for several of these names already point lower, suggesting normalization. But with crude expected to stay range-bound and OPEC+ supply disciplined, the sector's shift toward cash returns rather than volume growth gives the strongest operators a durable income story into 2027.

This article is for informational purposes only and does not constitute investment advice.