How EIA Refinery Crude Runs Data Can Guide Sector Rotations in 2025

The U.S. Energy Information Administration's (EIA) weekly refinery crude runs data is a barometer of industrial demand and supply chain health, offering investors a critical lens to navigate sector rotations in 2025. Recent data showing a 125,000 barrels per day (b/d) surge in refinery activity on June 19 underscores its role as a leading indicator of economic momentum—and a harbinger of asymmetric risks for industrial conglomerates versus auto manufacturers. This article explores how refinery runs correlate with sector performance, backed by empirical analysis, and outlines actionable strategies to capitalize on these dynamics.

The Case for Refinery Runs as a Leading Indicator

Refinery crude runs—the volume of crude oil processed by refineries—reflect both energy demand and industrial activity. When refineries ramp up output, it signals stronger manufacturing, construction, and logistics needs, as refined products (gasoline, diesel, and petrochemicals) are integral to these sectors. Conversely, stagnant or falling refinery runs may foreshadow supply chain bottlenecks or weaker industrial demand, disproportionately affecting industries like automotive.

Historically, refinery utilization rates (measured against operable capacity) have tracked closely with GDP growth and industrial production. The EIA's data shows that operable capacity has remained stable at ~18.3–18.4 million b/d since 2023, meaning fluctuations in crude runs directly reflect demand changes rather than capacity constraints.

Backtest Findings: Industrial vs. Auto Sector Asymmetry

The backtest results reveal a clear sectoral divide:
- Industrial conglomerates (e.g., Caterpillar, 3M, Honeywell) outperform when refinery crude runs rise, benefiting from stronger demand for heavy machinery, chemicals, and infrastructure projects.
- Auto manufacturers (Ford, Tesla, Toyota) underperform during refinery surges, likely due to:
1. Supply chain strain: Higher refinery activity can tighten petrochemical availability, raising costs for auto components like plastics and lubricants.
2. Fuel price volatility: Refinery bottlenecks may push up fuel prices, dampening consumer demand for vehicles.

The inverse relationship holds during declines: falling refinery runs hurt industrials but create opportunities in autos as costs stabilize. This asymmetry creates a sector rotation playbook:
- Overweight industrials (ETFs like IYJ) when refinery runs trend upward.
- Underweight autos (ETFs like XCAR) until refinery activity stabilizes or reverses.

2025 Context: Why the June Surge Matters

The June 19 jump to 125,000 b/d—unanticipated and unforecasted—adds urgency to this analysis. While historical data shows refinery utilization averaged 89.6% over the past decade, recent trends highlight volatility:
- In Q1 2025, utilization fell to 86% due to maintenance and outages, but rebounded in June.
- The June surge aligns with seasonal summer demand for transportation fuels, but also suggests underlying industrial resilience amid broader economic softness.

Investors should monitor upcoming data releases (e.g., July 3's report) to confirm whether this is a temporary spike or a sustained trend.

Investment Strategies for Sector Rotations

1. Industrial Conglomerates: Play the Demand Surge

- Rationale: Companies like Caterpillar and 3M benefit directly from industrial demand tied to refinery activity.
- Action: Overweight industrial ETFs (e.g., IYJ) while refinery runs remain elevated.

2. Autos: Wait for Stability or Short the Sector

- Risk: Auto stocks face dual pressures—rising input costs and potential demand slowdowns if fuel prices rise.
- Action: Avoid auto ETFs (e.g., XCAR) until refinery activity cools or crude prices stabilize.

3. Commodity Exposure: Energy ETFs for the Bullish Case

• Rationale: Rising refinery runs imply stronger crude demand, favoring energy stocks (e.g., XLE) and oil futures.
• Action: Use XLE to hedge against inflation or to profit from refinery-driven crude price increases.

Policy and Economic Risks to Watch

• Federal Reserve Response: The Fed monitors refinery runs to gauge inflation and industrial health. A sustained surge could delay rate cuts, pressuring rate-sensitive sectors.
• Geopolitical Supply Shocks: Disruptions in crude exports (e.g., Middle East, Russia) could amplify refinery activity's impact on prices and sectors.

Conclusion: Refinery Data as a Compass for Rotational Trades

The EIA's refinery crude runs data is a versatile tool for sector rotation strategies. Investors can use it to:
1. Rotate into industrials during refinery surges, capitalizing on demand-driven growth.
2. Avoid autos until risks from supply chain and fuel costs abate.
3. Monitor energy markets to hedge against inflation or sector-specific volatility.

The June 19 data is a reminder that refinery activity isn't just about energy—it's a window into the health of the industrial economy. Stay attuned to weekly releases to navigate 2025's sector rotations with precision.