Bernstein: Americas Oil — Inaugural Refining State of the Business 4Q25: Spreads Drive the Sector at Historic Highs
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Bernstein launches its inaugural Refining State of the Business report, analyzing the top eight U.S. refiners with a combined enterprise value of approximately $323 billion. The analysis highlights that crack spreads are currently at historically extreme levels, driven by elevated crude costs and disrupted global trade flows. Refining equities are trading at roughly 0.5x EV/Sales, with sustainable free cash flow generation enabling continuous sector deleveraging.
In the fourth quarter of 2025, sector revenue declined 6% sequentially due to a 3% drop in U.S. Gulf Coast crack spreads. However, free cash flow margins expanded from 4% to 6%, and the reinvestment rate fell from 34% to 26%. Although crude and feedstock purchases consume about 90% of total revenue, the disciplined business model consistently translates debt reduction into market capitalization growth.
Bernstein notes that these robust refining outcomes provide positive read-throughs for integrated oil majors. Under the current environment of surging Brent prices and crack spreads, ExxonMobil benefits more significantly than Chevron due to its larger downstream scale.
The report cautions about a critical macroeconomic threshold: if the combined price of crude and crack spreads exceeds 6% of GDP—approximately $180 per barrel—energy demand could contract a year later. Currently, the combined WTI and U.S. Gulf Coast 321 spread sits near $155 per barrel, approaching but remaining below this pain threshold. Given current conditions, the macroeconomic environment remains supportive but warrants careful monitoring for potential demand destruction.