By Avi Salzman

Ukraine has found a new way to disrupt Russia's economy, and it's scrambling the global oil market. The biggest winners so far are refiners like Valero and Marathon Petroleum, which are profiting from wider profit margins on products like gasoline and diesel.

Ukraine has been attacking Russian refineries with drones as the war drags on. The attacks have targeted at least 1.5 million barrels worth of Russian refining capacity, according to TD Cowen analyst Jason Gabelman. This month, Russia's exports of oil products like diesel and gasoline out of Russia are down about 300,000 barrels per day compared with the same period last year.

Total global refining capacity is over 100 million barrels, but small changes in supply can have a big impact. Commodities often trade based on shifts in the availability of a marginal barrel.

The attacks have had a major positive impact on refiners outside of Russia. Refiners often struggle this time of year, because people are driving less than they were during the summer. But the attacks have changed the narrative, and the economics of turning crude into products. Refiners are now seeing very wide margins. One measure of refining margins that takes into account both gasoline and diesel is up 34% year over year, according to Jefferies.

The change has lifted the stocks of major US refiners. Valero is up 13% in the past month and Marathon Petroleum has risen 9.4%. Smaller player PBF Energy is up 25%.

Those moves are particularly surprising given that more diversified oil companies have struggled, due to flat crude prices. Exxon Mobil is up just 1% in the past month. Exxon's refining business benefits from wider margins, but it's making less money selling crude.

Some analysts say they expect the Ukrainian attacks to continue boosting refiners, changing expectations for third quarter earnings.

"Before these attacks happened, we had expected the market to soften a bit -- and it started to do so," Gabelman said. "But these attacks create a level of uncertainty that's difficult to account for. That's why it's difficult to bet against the group right now."

Gabelman likes Marathon Petroleum in particular, because the company has been particularly good at taking advantage of high margins to increase its cash flow. His price target is $195, versus a recent $188.

UBS also cited the Ukrainian drone attacks as a reason to buy a refiner. On Sunday, UBS analyst Manav Gupta boosted his earnings estimates for Valero and increased his price target to $183 from $165. Shares were around $165 on Monday.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

September 22, 2025 13:24 ET (17:24 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.