Valero Energy Plummets 2.53% Amid Geopolitical Turmoil and Refining Sector Woes

Summary
• Valero Energy (VLO) trades at $171.55, down 2.53% from its previous close of $176.00
• Sector-wide energy stock declines and BofA’s downgrade to Neutral weigh on sentiment
• Intraday range of $169.82 to $173.97 highlights volatile session dynamics

Valero Energy’s sharp intraday decline reflects a confluence of sector-wide headwinds and geopolitical uncertainty. With refining margins under pressure from a global oil surplus and OPEC+ policy ambiguity, the stock’s 2.53% drop underscores investor caution. The session’s $4.15 range—from a low of $169.82 to a high of $173.97—signals heightened volatility as traders grapple with conflicting signals from energy markets and macroeconomic concerns.

Geopolitical Tensions and Refining Sector Pressures Drive VLO’s Sharp Decline
Valero Energy’s intraday selloff is driven by a perfect storm of geopolitical instability and refining sector fragility. The IEA’s December 2025 Oil Market Report highlights a 3.85 mb/d surplus in OPEC+ crude production, with Russia and Venezuela accounting for 80% of the decline in November. Meanwhile, BofA’s downgrade to Neutral cites 'likely temporary' factors—Ukraine-Russia drone strikes, European gas prices, and delayed refinery expansions—as unsustainable tailwinds. The sector’s vulnerability is compounded by Ukraine’s drone attacks on 17 Russian refineries, which have disrupted fuel exports and forced Moscow to divert resources to drone defenses. These dynamics have pushed refining crack spreads to 3-year highs, eroding margins for refiners like Valero.

Energy Sector Volatility Intensifies as VLO Trails Peers
The energy sector’s broad weakness amplifies Valero’s decline. Phillips 66 (PSX), the sector leader, trades down 0.42% despite its recent retail divestment, while the XLE energy ETF lags behind the S&P 500. The IEA’s revised 2026 global refinery runs forecast (84.4 mb/d) underscores sector-wide challenges, with European throughput expected to hit 95% of capacity. Valero’s 32.4x dynamic P/E ratio, compared to the sector’s 37.1x average, highlights its relative undervaluation but also exposes it to margin compression risks as refining economics normalize.

Options Playbook: Capitalizing on VLO’s Volatility with Strategic Put Options
• RSI: 42.58 (oversold)
• MACD: 1.01 (bearish divergence)
• Bollinger Bands: $169.83 (lower) to $183.50 (upper)
• 200-day MA: $144.58 (far below current price)

Valero’s technical profile suggests a short-term bearish bias amid oversold conditions. Key support levels at $170 and $165 align with the 200-day MA and Bollinger Band floor. For aggressive short-term positioning, two put options stand out:

• VLO20251219P172.5: Put option with 33.85% implied volatility, 46.58% leverage ratio, and 0.040249 theta. Turnover of 99,242 contracts indicates strong liquidity. A 5% downside to $163.00 would yield a $9.50 payoff (K - ST = $172.50 - $163.00).
• VLO20251219P175: Put option with 39.09% IV, 30.40% leverage ratio, and 0.030674 theta. Turnover of 21,092 contracts supports tradability. A 5% move to $163.00 would generate a $12.50 payoff (K - ST = $175 - $163.00).

Both options benefit from high gamma (0.0368–0.0435) and moderate delta (-0.49 to -0.58), offering directional exposure with time decay protection. Aggressive bears may consider VLO20251219P175 into a breakdown below $170, while risk-averse traders could use VLO20251219P172.5 as a core position.

Backtest Valero Energy Stock Performance
The backtest of VanEck Vectors Gold Miners ETF (VLO) after a -3% intraday plunge from 2022 to now shows favorable performance metrics. The 3-Day win rate is 56.48%, the 10-Day win rate is 56.48%, and the 30-Day win rate is 58.46%. This indicates that VLO tends to bounce back after short-term declines. The maximum return during the backtest period was 5.97%, which occurred on day 59, suggesting that VLO can deliver positive returns even after significant pullbacks.

VLO at a Crossroads: Navigating Short-Term Volatility with a Long-Term Lens
Valero Energy’s 2.53% decline reflects immediate sector pressures but masks its long-term appeal as a refining sector bellwether. With a 48.09% YTD return and a dividend yield of 2.6%, the stock remains attractively valued despite its 32.4x P/E. Investors should monitor the $170 support level and the IEA’s 2026 surplus projections for directional clues. Meanwhile, Phillips 66’s -0.42% move highlights sector-wide fragility. For those seeking leverage, the VLO20251219P175 put offers a high-leverage, high-liquidity play on a potential $163.00 target. Watch for a breakdown below $169.83 to confirm bearish momentum.