Navigating Energy Market Shifts: Investment Strategies in a Declining Crude Runs Environment

The U.S. Energy Information Administration (EIA) has reported a sustained decline in refinery crude runs, with a 0.051 million barrel drop in the week ending September 5, 2025, marking the third consecutive weekly reduction. While utilization rates remain elevated at 94.3%, this trend signals shifting dynamics in the energy sector, with cascading effects on downstream industries and infrastructure-linked sectors. Investors must now dissect these changes to identify risks and opportunities in a market increasingly shaped by supply chain adjustments and evolving demand patterns.

Downstream Industries: Petrochemicals and Transportation Fuels

Petrochemicals face a dual challenge. Refineries produce naphtha and other feedstocks critical for plastics and chemicals. A decline in crude runs could tighten feedstock availability, pushing up costs for producers like LyondellBasell Industries (LYB) or Dow Inc. (DOW). However, this pressure may also drive innovation in alternative feedstocks, such as ethane from shale gas, offering long-term upside for companies with diversified sourcing strategies.

Transportation fuels are equally vulnerable. Reduced crude processing means lower gasoline and diesel output, which could exacerbate supply gaps during peak demand periods. For instance, the EIA noted a 125,000-barrel-per-day spike in June 2025, reflecting summer travel surges. If refineries cannot scale up quickly, distributors like Marathon Petroleum (MPC) or Valero Energy (VLO) may see margin compression. Conversely, this scenario could benefit companies with robust logistics networks to redirect refined products to export markets, where global demand remains resilient.

Infrastructure Sectors: Pipelines and Storage

The decline in crude runs also reshapes infrastructure dynamics. Pipelines transporting crude to refineries may see reduced throughput, impacting operators like Enterprise Products Partners (EPD) or Kinder Morgan (KMI). However, the shift toward exporting refined products could boost demand for export terminals and marine infrastructure, creating opportunities for firms like Magellan Midstream Partners (MMP).

Storage facilities are another key area. With crude inventories declining and exports rising, there may be a temporary surge in demand for storage of refined products. Companies with strategic locations near export hubs, such as Covanta Holding (CVA) or Gulf Island Fabrication (GIFI), could benefit. Yet, overcapacity in crude storage might weigh on margins for operators focused on crude rather than refined products.

Positioning Strategies for Investors

1. Hedge Against Feedstock Volatility: Investors in petrochemicals should prioritize companies with diversified feedstock access or strong hedging programs. For example, Chevron Phillips Chemical (PPX) has historically leveraged its parent company's refining assets to secure cost-advantaged feedstocks.
2. Target Export-Focused Refiners: As domestic demand stabilizes, refiners with export capabilities—such as Phillips 66 (PSX) or Hess Corporation (HES)—are well-positioned to capitalize on global markets.
3. Rebalance Infrastructure Portfolios: Shift allocations toward infrastructure firms with exposure to refined product logistics and terminals. Avoid pure-play crude storage operators unless valuations reflect discounted cash flow assumptions.
4. Monitor Seasonal and Policy Shifts: The EIA's data highlights seasonal volatility, such as the June 2025 spike. Investors should also watch for policy-driven shifts, such as incentives for renewable fuels, which could further disrupt traditional refining margins.

Conclusion

The decline in U.S. refinery crude runs is not merely a cyclical blip but a symptom of broader structural shifts in energy markets. While downstream industries face near-term headwinds, these challenges also create niches for strategic investors. By aligning portfolios with companies that adapt to export demand, optimize feedstock flexibility, and leverage infrastructure transitions, investors can navigate this evolving landscape with confidence. The key lies in balancing short-term risks with long-term resilience, ensuring exposure to sectors poised to thrive in a post-traditional refining era.