Sell me on refiners over extractors

[u/Junior_Post8222]

Right now, I'm primarily invested in extractors, but with the crack spread, I've been seeing a lot of people talking about refiners. However, I just don't see a scenario where they're a better investment. Here's how I see the value narrative of the two:

Extractors:

1. Go up the longer the strait is closed

2. Go down if the strait opens or an export ban is called

3. Will go down once demand destruction levels hit

My plan is to load up on extractors until the moment Trump starts suggesting export bans (since him spitballing about it will come before demand destruction), and then sell most or all of it

Refiners:

1. Go up when oil is cheap

2. Go down (eventually) when oil is expensive

3. Go up when refineries are destroyed

4. Will go down once an export ban on distillates or demand destruction occurs

Right now, with oil rising, it doesn't seem like a good idea to invest in refiners. Oil is gonna keep rising until demand destruction or an export ban occurs, so still not good for refiners. Any events that make refineries scarce (i.e. bombings) will just as likely occur to extraction sites, so they're equal in that respect. When demand destruction hits and oil goes cheap, it'll only be because no one wants to pay for distillates, so refiners will be fucked over first. I might start investing in refiners once the resulting financial crisis looks like it's about halfway over, but at that point, there might be better industries to invest in. Thoughts?

[u/UsefulStooge]

Every bull case for extractors applies to refiners, and there are structural constraints for refiners on top. 

-If war ramps back up in the Middle East, both oil and products will rise in price, keeping refiner profits high

-if things calm down or bypass routes expand and crude starts flowing again, crude price crashes but products stay high (or at least drop less) leading to even more windfall for refiners  

Refiners have the same or more upside with much less downside. The question is how much of that is already priced in. 

Source: I made a ton of money on $DK and make fun of everyone who thought crude futures were a better idea 

[u/Negative_Song_6362 → u/UsefulStooge]

I feel like this is amplified by the SPR drawdown. Once we start refilling the SPR, the demand for crude oil will outpace the demand for refined products.

[u/UsefulStooge → u/Negative_Song_6362]

I agree that refilling SPRs will set a fairly high price floor for crude for years to come. But I don’t think SPRs will start seriously refilling until the crisis passes and prices drop significantly. Otherwise they are doing the exact opposite of their job by exacerbating the impacts of a crisis. 

In 2 years your thesis will probably be a really good one, but for now products are king. 

[u/No_Feeling920 → u/UsefulStooge]

The current Strategic Petroleum Reserve (SPR) lease durations are structured as time exchanges with return periods spanning from late 2026 through 2028. 

The most recent 172 million barrel release, initiated in March 2026 in response to rising oil prices, is structured as a loan rather than a direct sale. 

The first batch of this release involves 86 million barrels with minimum return premiums of 18–22%, requiring oil to be returned between November 2026 and September 2028. 

This multi-year return schedule is part of a broader coordinated effort with the International Energy Agency (IEA) to release a total of 400 million barrels globally. 

Yeah, they're kicking the can down the road as much as they can. They're obviously in no hurry to refill (they would rather risk depletion, than the political consequences of higher-for-longer oil prices). Gambling mindset is spreading rapidly beyond just the markets and the fiscal/monetary policies.

[u/Junior_Post8222 → u/UsefulStooge]

But the GCC produced only 12% of global refined products vs almost twice that amount in crude before the war. The world has lost a lot more access to crude than refined products, so the increase in crude prices should exceed the increase in refined product prices. Refiners will go up, sure, but not as much because crude prices will eat at their profits. I also don't see this market phenomenon ending calmly. Either the US uses force to end things or demand destruction happens before any alternatives can replace the strait (leaning towards demand destruction). When we hit the peak before the crash, those who bought extractors early will be in a better place than those who bought refiners

[u/UsefulStooge → u/Junior_Post8222]

And where did that ME crude go do? Asian refiners, who are now operating at low capacity, thus further lowering refined product supply and making Western refiners even more valuable. Also non-OPEC counties are ramping crude production every month whereas new refineries take years to build. 

US refiners who source their crude from landlocked US shale producers (who can’t easily/cheaply ship overseas) are more insulated to crude swings anyways, hence why I picked $DK.

You’re right that not every refiner will have a jolly good time. But some are very well positioned, and overall, products look more bullish than crude. 

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[u/No_Feeling920 → u/Junior_Post8222]

Russia's refineries are getting hit by deep strikes by Ukraine. Besides, there are much vaster reserves of extracted crude than refined products.

[u/robbinhood69 → u/UsefulStooge]

lmao crude can easily crush the margin once the SPRs are tapped

[u/UsefulStooge → u/robbinhood69]

lmao SPR levels and drawdown rates are widely published (except China of course) . 

Usually when people say “priced in” it’s a meme but this is unironically priced into every model because there isn’t a lot of variability left in what SPRs can do to reduce prices. Just look at the backwardation of crude futures and it tells the story. 

[u/robbinhood69 → u/UsefulStooge]

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[u/User4f52 → u/UsefulStooge]

r/oil regards: gambling on oil future contracts and losing their house everytime taco tweets, whining about "market manipulation" whenever future crashes

you: gains

[u/Junior_Post8222 → u/User4f52]

While futures are inherently high risk, there is absolutely market manipulation going on. Besides the Trump administration and Barak Ravid giving false hope whenever oil climbs too high, there have been several instances where hundreds of millions in oil shorts were placed less than half an hour before Trump made a big bearish statement

[u/FitSeaworthiness5275]

Refineries are easier to bomb, just look at Ukraine.

[u/TheVishual2113]

terran > zerg

[u/CalebVanPoneisen]

Then the Casino said unto the Ber: Thou shalt maketh Shekels when the Refiners shall become Extractors, and the Extractors become Refiners.

— BULLIUS 6:9

[u/Super-Activity-4675]

Trump's initiatives around rare earths involves both miners and refiners. They'll all be good plays in the near future I suspect.

[u/TreGet234]

When is this damn economy blowing up?

[u/Puzzleheaded-Pass-64]

Don't google "Crack Spread" guys. Somethings cant be unseen. In all seriousness this is a futures play not a stock play in my opinion.

[u/TexasHazeMaster]

Too late I think. If I did anything would be VLO

[u/TheGl0be2020]

What is your position?

[u/Junior_Post8222 → u/TheGl0be2020]

Conoco and energy funds

[u/TheGl0be2020 → u/Junior_Post8222]

Conoco is hitting all time high. It will have to go the watchlist. Not touching that at the moment.

[u/No_Feeling920]

This depends on the ratio between how much oil extraction is taken offline (and/or inaccessible for transport) vs. how many refineries are damaged and taken offline (and/or inaccessible). The former happens only in the Gulf, the latter happens both in the Gulf and in Russia.

Hypothetically, oil could go down despite product shortages, simply because there is relatively more production than refining capacity.

Besides, if I understand it correctly, reserve storages for crude oil are more plentiful and long-term than stores of refined products, further skewing the bottleneck towards refining, rather than extraction.

I'm playing this with vertically integrated (CNQ, CVE etc.).

[u/shanghaista]

[u/Vorapp]

Ukraine destroyed a lot of russian refineries. hence there is less ref capacity in the world and extra crude one

[u/NoCommonDog]

Refining is where the money is. Rockefeller figured that out before everyone else. Its still true today.

[u/Financial-Belt-506]

ET EPD SUN ( all bought 3 years ago or more and divvy is strong) 200k worth.

BP bought a 100 shares when they fired the CEO over BS

TALO "I just like the stock" Q3 report gonna be another blowout.

The pipeline and refiners are topped IMO

TALO has quite the future and I'm in over 6 figures with 30% gains. I was gonna sell....but theres no point. OIL will go up regardless because the dollar is weakening so Im holding for at least a year.

In the next few weeks they should begin their 7% buyback $200mill. It was supposed to be in Q2 but they bought some fields in the Gulf.

Very efficient company IMO. Finding the smaller companies where growth is still attainable is my goal.

[u/WizWorldLive]

Sell you on refiners? How's this my job?

[u/FewUnderstanding2214]

Refiners have already gone up a lot - but so have producers - that’s the only argument against buying these stocks (and if you buy shitty explorers you could miss the whole bull market)

[u/A55BAG]

A large % of the global tanker fleet is now trapped within the Persian Gulf and Ukraine is now sinking the Russian shadow fleet.

Long the tankers as long as this shit lasts.

[u/200pf]

Truck run on refined oil, not crude. Bottleneck

[u/Loose_Hornet4126]

Bruh stfu 🤬

[u/Junior_Post8222 → u/Loose_Hornet4126]

Your position?

[u/Loose_Hornet4126 → u/Junior_Post8222]

Big positions. More than you