Brent crude has traded back above $100 a barrel for the first time in two months after Houthi attacks on two Saudi tankers and the collapse of the U.S.-Iran ceasefire. Refining margins widened at the same time, with the 3:2:1 crack spread soaring toward $70 a barrel while U.S. refining capacity keeps shrinking.
Oil surged back above $100 a barrel on the Brent benchmark, the first time it has traded there in two months, according to a MarketBeat analysis published on Investing.com. The Houthis claimed attacks on two Saudi oil tankers in the Red Sea, and Saudi authorities confirmed that one vessel was struck and caught fire. The U.S.-Iran ceasefire also collapsed, and together those two events reignited fears of a wider supply disruption.
Crack spreads soar toward $70 a barrel
Refiners are posting some of the widest margins in decades. The 3:2:1 crack spread — the profit from turning three barrels of crude into two barrels of gasoline and one barrel of diesel — has soared toward $70 a barrel, a level the analysis calls unseen in recent history.
That margin sits on top of a shrinking base. Permitting hurdles have stalled proposed projects for years, and no major energy company has attempted a greenfield refinery in decades. Three refineries have shut down in the past year alone, and existing capacity keeps shrinking even as diesel demand climbs.
Refiners send cash to shareholders instead of new plants
Valero Energy and Marathon Petroleum each run roughly 3 million barrels a day of capacity. Both stocks are up 80% to 90% year to date, a run the analysis says makes some investors nervous about chasing a 52-week high.
Because there is no new capacity to build, the analysis argues both companies are positioned to funnel record cash flow into buybacks and dividends instead of reinvestment — a dynamic that tends to persist as long as the margin backdrop holds. The risk it flags is a genuine, lasting de-escalation that pulls oil back toward pre-war levels and compresses those spreads. That outcome has already failed once this year.
Source: MarketBeat.com
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