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This Month's Exclusive News
As Energy Surges on Crack Spreads, Consider Taking Gains on 2 Small Cap Oil StocksWritten by Dan Schmidt. First Published: 3/24/2026. 
Key Points
- Crude oil prices have surged since the start of the Iran War, boosting the stocks of oil and gas companies across the industry.
- One unlikely beneficiary has been downstream refiners that benefit from large crack spreads, which measure the difference in raw and refined petroleum products.
- If these spreads normalize quickly, refiner margin compression will follow, so it might be time to take profits on these two soaring small-cap refiners.
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Oil and gas stocks have surged since the start of the Iran conflict, largely because the Persian Gulf plays a critical role in global oil supply. Approximately 20 million barrels per day pass through the Strait of Hormuz — roughly 20% of the world’s total supply. But the real story for investors goes beyond rising crude prices: refiners are benefiting from an unusual gap between crude and refined-product prices, such as diesel, gasoline, and jet fuel. Known as crack spreads, these gaps have propelled downstream oil stocks, particularly in the United States.
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That dynamic makes two small-cap refiners worth a closer look, because their recent gains are closely tied to today’s unusually favorable spreads — and could unwind quickly if conditions normalize. Why Crude Prices Can Matter Less for Downstream CompaniesIf you’ve passed a gas station lately, you’ve likely noticed how quickly prices have risen. According to AAA, the average national fuel price in the United States is currently $3.94 — up more than $1 in just a month. Diesel prices, which many consumers pay less attention to, have climbed even faster. Crack spreads illustrate why the energy sector is divided into upstream, midstream, and downstream companies:
- Upstream: Companies that directly benefit from oil price increases, as they extract oil from the ground.
- Midstream: Companies that operate the infrastructure connecting upstream to downstream, focusing on transportation, storage, and processing.
- Downstream: Companies that refine, process, and market finished products, including gasoline, diesel, and petrochemicals.
Downstream companies don’t necessarily benefit from higher crude prices alone. Instead, their profitability depends on the crack spread — the difference between crude oil and refined-product prices. Oil prices have jumped since the fighting in Iran began, but many downstream firms have been insulated by widening crack spreads after Persian Gulf refining capacity went offline, which has boosted margins for refiners. Many market participants initially expected a short conflict, but now that the fighting appears entrenched, industry stocks have rallied sharply. That repricing, however, overlooks margin risks that could materialize as quickly as the crack spreads widened. Key catalysts to watch include:
- Reopening of the Strait of Hormuz: If the waterway reopens faster than expected, crude supply will return gradually while refined products could flow back more quickly. That would likely push wholesale product prices down while crude remains elevated, compressing refiner margins.
- Demand destruction from prolonged shock: Persistently high crude prices can trigger slower economic activity or a recession, reducing demand for refined products. For example, a drop in travel demand would lead airlines to curb fuel purchases, lowering refiners' revenue.
On top of these risks, governments are releasing oil from strategic reserves to limit price spikes, which could help normalize spreads. Meanwhile, policy and export decisions in China could materially affect global product flows — if China increases gasoline and diesel exports to Europe and Asia, U.S. refiners' margins could compress quickly. 2 Oil and Gas Stocks That Don’t Want Spreads to NormalizeLarge-cap refiners often have hedging programs and stronger balance sheets to offset spread volatility. Small-cap refiners generally lack those cushions, so a rapid crack-spread reset could prompt an abrupt revaluation. Here are two small-cap downstream stocks where prudent investors might consider taking profits or trimming exposure. CVR Energy: Beware the False BreakoutCVR Energy Inc. (NYSE: CVI) is already up more than 60% this month, aided by rising petroleum and fertilizer prices. The company's Petroleum Products division refines crude into diesel, gasoline, and jet fuel, while its Nitrogen Fertilizers segment produces ammonia and urea for agricultural use. Before the Iran conflict began, CVR Energy reported a 7% year-over-year revenue decline in Q4 2025, so the recent price shock has been timely for the company. CVI shares have surged past their 50- and 200-day moving averages over the past few weeks, but the rally looks tenuous. 
The Relative Strength Index (RSI) is firmly in overbought territory (above 76), and nearly 6% of the float is sold short, suggesting part of the rally could be driven by short-covering. Despite the recent gains, five of the six analysts covering CVI maintain a sell rating. PBF Energy: Earnings Beat Could Be a Ticking Time BombUnlike CVR, PBF Energy Inc. (NYSE: PBF) received a company-specific tailwind from its Q4 2025 results, which helped ignite a parabolic rally. While revenue missed expectations, EPS of $0.49 beat the consensus loss of $0.15. Management noted that crack spreads were benefiting the company even before the initial strikes against Iran. The stock is up more than 80% year to date, including a gain of over 40% in the past month. 
Now that the earnings boost is fading, technical headwinds are emerging. With short interest exceeding 20%, the stock has seen heavy activity from both bulls and bears, which has pushed it into overbought RSI levels. A potential double-top pattern is forming on the daily chart. Insiders sold more than $300 million of PBF shares in Q1 with little offsetting buying, and analysts continue to rate the company a sell with a consensus price target more than 30% below current levels. |
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