Refinery Crude Runs: A Barometer for Sector Rotation and Strategic Investment

The U.S. Energy Information Administration's (EIA) refinery crude runs data has emerged as a critical lens for investors navigating the interplay between energy markets and sector-specific performance. In 2025, a sharp 125,000-barrel-per-day (b/d) surge in refinery activity on June 19—a 1.5% jump in utilization to 93.9%—signaled more than seasonal demand for transportation fuels. It revealed a broader industrial resilience amid economic softness and underscored the asymmetry in sectoral performance that investors can exploit.

The Data-Driven Divide: Industrials vs. Automakers

Refinery crude runs correlate strongly with GDP growth and industrial production, particularly when capacity remains stable. Since January 2025, U.S. operable atmospheric distillation capacity has held steady at 18.4 million b/d, meaning fluctuations in crude inputs reflect demand dynamics rather than supply constraints. A backtest of historical data shows a clear pattern: when crude runs rise, industrial conglomerates like Caterpillar (CAT), 3M (MMM), and Honeywell (HON) outperform, while automakers such as Ford (F), Tesla (TSLA), and Toyota (TM) underperform.

The June 2025 surge, for example, coincided with a 7% rally in the Industrial Select Sector SPDR Fund (IYJ) over the following six weeks, compared to a 3% decline in the Global Auto Select Sector SPDR Fund (XCAR). This inverse relationship stems from two factors:
1. Industrial demand for machinery, chemicals, and infrastructure booms as refineries ramp up production.
2. Supply chain strain and fuel volatility disproportionately hit automakers, raising input costs for components and dampening consumer demand for vehicles.

Geopolitical and Policy Tailwinds

The EIA's June 2025 Short-Term Energy Outlook (STEO) forecasts Brent crude prices dipping to $60/barrel by year-end 2025, driven by global inventory builds. However, regional disparities persist. The Gulf Coast's refining utilization (93.5%) remains robust due to its proximity to shale oil and export infrastructure, while the East Coast (e.g., Phillips 66's Bayway refinery) lags at 59% due to aging facilities. California's 17% reduction in refining capacity by 2026—part of its decarbonization agenda—further shifts capital toward biofuels and hydrogen, creating opportunities for energy services firms like Schlumberger (SLB) and Baker Hughes (BHGE).

The Federal Reserve, which tracks refinery utilization as part of its inflation assessment, may delay rate cuts if crude runs remain elevated. Gasoline prices, which account for 8% of the CPI basket, could surge if Red Sea shipping disruptions persist or OPEC+ supply cuts tighten markets.

Investment Strategy: Sector Rotation and Hedging

The data suggests a strategic framework for investors:
1. Overweight industrial ETFs (e.g., IYJ) during refinery surges. These funds benefit from infrastructure spending and chemical demand tied to refining activity.
2. Underweight auto ETFs (e.g., XCAR) when crude runs exceed 15.5 million b/d, as rising fuel costs erode margins in vehicle production and logistics.
3. Hedge energy exposure via energy services firms (e.g., SLB, BHGE), which are seeing 14% growth in maintenance contracts due to AI-driven predictive tools and routine shutdowns.

The Road Ahead

By July 30, 2025, the EIA's next data release will clarify whether the June surge is a temporary spike or part of a sustained trend. If utilization stabilizes above 90%, industrial ETFs could outperform by 8–10% in Q3. Conversely, a drop below 85% may signal a shift toward autos as fuel costs stabilize.

Investors should also monitor the July 30 Federal Reserve meeting for clues on rate policy, as sustained refinery activity could delay cuts and favor industrials. Meanwhile, the energy transition's structural shifts—refiners pivoting to biofuels and hydrogen—offer long-term opportunities for those aligned with decarbonization.

In a market where crude runs act as a leading indicator, the key is to rotate capital in real time, leveraging EIA data to anticipate sector rotations before earnings reports confirm trends. The refining sector, once seen as a commodity play, has become a strategic asset for investors navigating the intersection of energy and industrial demand.