Refinery Crude Runs: A Strategic Indicator for Energy and Materials Sector Rotation

The global energy landscape is shifting, and investors who understand the interplay between refinery crude runs and sector performance stand to gain a significant edge. Recent data reveals that refinery crude runs—a measure of how much crude oil is processed into fuels and petrochemicals—have surged to 85.1 million barrels per day (mb/d) in August 2025, a record high driven by seasonal demand and geopolitical pressures. This surge, followed by a tapering in October due to maintenance cycles, underscores the cyclical nature of refining activity and its profound implications for energy and materials sectors.

Refinery Utilization as a Leading Indicator

Refinery crude runs are more than a supply-side metric; they act as a barometer for industrial demand and supply chain dynamics. When utilization rates climb above 90% of operable capacity, as seen in late 2025, it signals robust demand for refined products like diesel and gasoline. This, in turn, drives industrial activity, from machinery to chemicals, and creates a ripple effect across the energy and materials sectors.

Historically, such spikes have preceded outperformance in industrials. For example, during the 2023 refinery boom, the Industrial Select Sector SPDR Fund (XLI) outperformed the S&P 500 by 6–8% in subsequent quarters. Companies like Caterpillar (CAT) and Honeywell (HON), which supply equipment and chemicals to refineries, saw elevated demand and stock gains.

Conversely, sectors sensitive to fuel prices, such as automakers and refiners, face headwinds. Tight petrochemical supplies and rising input costs for plastics and lubricants have pressured margins for Ford (F) and General Motors (GM). Refiners like Valero (VLO) and Marathon (MRO) also struggle with margin compression, as seen during the 2021–2022 period when crude runs surged.

Energy Transition and Sector Rotation

The energy transition adds another layer of complexity. While refining activity remains strong, the long-term decline in gasoline demand—driven by electric vehicle (EV) adoption—poses risks for traditional refiners. Tesla (TSLA), however, has demonstrated a historical inverse correlation with gasoline demand, a trend likely to intensify in 2026.

Investors should consider hedging exposure to fossil fuel-dependent sectors by allocating to renewable energy ETFs like the iShares Global Clean Energy ETF (ICLN). These instruments provide diversified access to solar, wind, and battery technologies, aligning with the decarbonization megatrend.

Strategic Positioning for 2026

The current surge in U.S. refinery crude runs—12.8 mb/d in late 2025—points to a structural shift in energy markets. Here's how to position a portfolio:

1. Overweight Energy Producers: Crude producers like ExxonMobil (XOM) and Chevron (CVX) benefit from stable production volumes and higher refining activity. Energy services firms, including Schlumberger (SLB) and Baker Hughes (BHI), are also well-positioned to capitalize on infrastructure spending and exploration demand.

2. Underweight Refiners and Autos: Refiners face margin pressures from constrained supplies and geopolitical disruptions. Automakers, particularly those reliant on internal combustion engines, are vulnerable to declining gasoline demand and EV competition.

3. Hedge with Renewables: Allocate to clean energy ETFs to offset long-term risks from the energy transition. This strategy balances exposure to traditional energy sectors while capturing growth in renewables.

4. Monitor Macroeconomic Signals: The Federal Reserve's inflation-fighting stance and OPEC+ policy shifts—such as the unwinding of 2.2 mb/d of voluntary production cuts—could introduce volatility. Investors should also track hurricane activity in the Gulf Coast, which accounts for 45% of U.S. refining capacity.

Conclusion

Refinery crude runs are a powerful predictive indicator for sector rotation in energy and materials. By analyzing historical patterns and current trends, investors can identify opportunities in industrials and energy producers while mitigating risks in refiners and autos. As the energy transition accelerates, a disciplined approach that combines traditional energy exposure with renewable hedging will be key to navigating the evolving landscape.