West Texas Intermediate (“WTI”) oil is currently trading below $75 per barrel, according to data from Oilprice.com, significantly down from the more than $100 per barrel mark reached in May this year. However, renewed tensions in the Middle East, following President Donald Trump's statement that the ceasefire agreement with Iran is no longer in effect, are once again supporting oil prices.
Considering the uncertainty arising from the renewed tensions, with the United States and Iran having already exchanged new, intense attacks, and its impact on the flow of oil through the Strait of Hormuz, which is responsible for the flow of significant global oil volumes, traders are taking a cautious approach. Oil prices remaining significantly below the highs seen earlier this year are aiding refiners like Valero Energy Corporation VLO with relatively attractive feedstock costs.
In other words, VLO, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products. Thus, Valero Energy, which generates significant margin from its refining activities, is likely to benefit from lower oil prices.
Will MPC & PSX Also Gain?
Marathon Petroleum Corp. MPC and Phillips 66 PSX are two other leading refining companies that are well poised to gain from the relatively softer crude prices.
MPC runs refining systems that are the largest in the United States. With high utilization of refineries, Marathon Petroleum is well-positioned to capture almost all of the available profitable opportunities.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. It is to be noted that the midstream business, by its very definition, is resilient since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility.
Hence, having a diversified business model, the large-cap stock is insulated from commodity price volatility to a great extent.
VLO’s Price Performance, Valuation & Estimates
Shares of VLO have gained 82.7% over the past year compared with the 38.4% improvement of the industry.
From a valuation standpoint, VLO trades at a trailing 12-month enterprise value to EBITDA of 8.65X. This is above the broader industry average of 5.74X.
The Zacks Consensus Estimate for VLO’s 2026 earnings has seen upward revisions over the past 30 days.
VLO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radical New Technology Could Hand Investors Huge Gains
Quantum Computing is the next technological revolution, and it could be even more advanced than AI.
While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.
Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power .
Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.
See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Valero Energy Corporation (VLO): Free Stock Analysis Report
Marathon Petroleum Corporation (MPC): Free Stock Analysis Report
Phillips 66 (PSX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).