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Further Reading from MarketBeat.com
As Energy Surges on Crack Spreads, Consider Taking Gains on 2 Small Cap Oil StocksAuthored by Dan Schmidt. Date Posted: 3/24/2026. 
Key Points
- Crude oil prices have surged since the start of the Iran War, boosting the stocks of oil and gas companies across the industry.
- One unlikely beneficiary has been downstream refiners that benefit from large crack spreads, which measure the difference in raw and refined petroleum products.
- If these spreads normalize quickly, refiner margin compression will follow, so it might be time to take profits on these two soaring small-cap refiners.
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Oil and gas stocks have surged since the start of the Iran conflict, largely because the Persian Gulf plays a vital role in global oil supply. Approximately 20 million barrels per day pass through the Strait of Hormuz, roughly 20% of total global supply. But the real story for investors goes beyond higher crude prices: refiners are benefiting from an unusual gap between crude and refined product prices—diesel, gasoline, and jet fuel. Known as crack spreads, these gaps have propelled downstream oil stocks, particularly in the United States.
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That dynamic makes two small-cap refiners worth a closer look, because their recent gains are closely tied to today’s unusually favorable spreads—and could unwind quickly if conditions normalize. Why Crude Prices Can Matter Less for Downstream CompaniesIf you’ve passed a gas station lately, you’ve likely noticed how quickly prices have risen. According to AAA, the average national fuel price in the United States is currently $3.94—up more than $1 in just a month. But unless you drive a diesel vehicle, you may have paid less attention to diesel prices, which have climbed even faster. Crack spreads illustrate why the energy sector is divided into upstream, midstream, and downstream companies:
- Upstream: Companies that extract oil and generally benefit directly from higher crude prices.
- Midstream: Companies that operate the infrastructure connecting upstream to downstream—focusing on transportation, storage, and processing.
- Downstream: Companies that refine, process, and market finished products such as gasoline, diesel, and petrochemicals.
Downstream companies don’t necessarily benefit from simply higher or lower oil prices. Rather, they focus on the crack spread—the difference between crude oil and refined product prices. Oil prices have jumped since the conflict in Iran began, but downstream companies have been insulated by widening crack spreads, which expanded when Persian Gulf refining capacity went offline, boosting margins for refiners. Many market participants had priced in a short conflict, but now that the fighting appears entrenched, stocks in this industry have gone parabolic. That repricing, however, may overlook margin headwinds that could materialize just as quickly as crack spreads widened. Key catalysts to watch include:
- When the Strait of Hormuz reopens: If the strait reopens faster than expected, crude prices might remain elevated as production ramps back up slowly. But refined-product supply could return more quickly, pushing wholesale prices lower while crude stays high—compressing refiner margins.
- Demand destruction from prolonged shock: Prolonged high crude prices could spark broader economic stress or a recession, reducing demand for refined petroleum products. For example, a sustained drop in travel would lead airlines and other large fuel buyers to cut purchases at elevated prices, reducing refiners' revenue.
On top of these risks, governments are releasing crude from strategic reserves to limit price spikes, which could help normalize spreads. Meanwhile, China's policy decisions matter: if China ramps up gasoline and diesel exports to Europe and Asia, U.S. refiners' margins could compress quickly. 2 Oil and Gas Stocks That Don’t Want Spreads to NormalizeLarge-cap refiners can blunt spread volatility with hedging programs and stronger balance sheets. Small-cap refiners often lack those safety nets, so a quick crack spread reset could trigger sharp repricing. Here are two small-cap downstream stocks where taking profits could be prudent. CVR Energy: Beware the False BreakoutCVR Energy Inc. (NYSE: CVI) is already up more than 60% this month, supported by both rising petroleum and fertilizer prices. The company's Petroleum Products division refines crude into diesel, gasoline, and jet fuel, while its Nitrogen Fertilizers segment produces ammonia and urea for plant nutrients. Before the Iran conflict began, CVR Energy reported a year-over-year (YOY) revenue decline of 7% in Q4 2025, so this price shock arrived at a favorable time for the company. CVI shares have moved above their 50- and 200-day moving averages in recent weeks, but the rally now looks tenuous. 
The Relative Strength Index (RSI) sits in overbought territory above 76, and nearly 6% of the float is sold short, suggesting the rally may be partly driven by short-covering. Despite recent gains, five of the six analysts covering CVI rate the stock a Sell. PBF Energy: Earnings Beat Could Be a Top-Ticking EventUnlike CVR, PBF Energy Inc. (NYSE: PBF) received a company-specific tailwind from its Q4 2025 results, which helped fuel a parabolic rally. While revenue targets were missed, earnings per share of $0.49 beat expectations for a $0.15 loss. Management noted that crack spreads were already benefiting the company before the first strikes were launched. The stock is up more than 80% so far in 2026, including a massive gain of over 40% in the past month alone. 
Now that the earnings boost is fading, technical headwinds are appearing. With current short interest above 20%, the stock has seen both buying and heavy short positioning in recent weeks, pushing it into overbought territory on the RSI and forming a potential double-top pattern on the daily chart. Insiders sold more than $300 million of PBF shares in Q1, with negligible insider buying, and analysts still assign the company a Sell rating with a consensus price target more than 30% below current levels. |
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