Goldman Sachs is singling out leaders in oil refining as its analysts assess a market that remains tight on product availability through late 2026. The bank notes that the global refining system is operating close to capacity constraints, a situation driven by aging plant infrastructure and a scarcity of significant new refining additions.
Even under a softer scenario in which utilization reverts to recently observed peak levels, Goldman Sachs' updated supply-demand balances indicate that product tightness would persist into the second half of 2026. Within this environment, the bank highlights a structural edge for U.S. refiners tied to crude access while screening globally for companies with strong balance sheets, reliable operational performance and attractive capital return programs.
Top equity selections and rationale
Goldman Sachs' preferred names span Asian merchant refiners, integrated regional players and U.S. coastal refiners. The bank's featured picks and the supporting detail are as follows:
- S-Oil - Goldman continues to prefer this Asian merchant refiner due to what it sees as an imminent free cash flow inflection. The firm emphasizes S-Oil's heavy exposure to middle distillates, which account for about 58% of its product yield, and notes the company is completing a $7 billion capital expenditure expansion targeted for mid-2026. That project is expected to drive a meaningful free cash flow pivot, with Goldman projecting a 17% FCF yield in 2027. The bank also points to strong March earnings momentum that could represent a sizable share of full-year 2026 consensus earnings. On inventories, S-Oil reportedly holds roughly 30 days of runs, and South Korea has secured over 80% of its crude import needs for May through July via diversified sources. The stock trades at more than one standard deviation below mean EV/EBITDA.
- Thai Oil - Cited as sharing many of S-Oil's characteristics, Thai Oil also derives around 58% of product yield from middle distillates and is moving beyond peak capex cycles. Goldman notes the company has rapidly diversified crude sourcing, with most feedstock already shifted away from Middle East suppliers in May and June 2026. Valuation looks compelling to the bank, with the stock trading at more than two standard deviations below mean EV/EBITDA.
- Reliance - Rated Buy by Goldman Sachs, Reliance benefits from flexible crude sourcing that has helped limit downside to both refining margins and throughput during recent supply disruptions. The bank highlights potential upside to margins if the company secures access to discounted Russian or Venezuelan crude.
- Valero Energy (VLO) - Goldman highlights Valero's premium asset base, Gulf Coast footprint and scale. While the bank remains mindful of downtime at Port Arthur, it views Valero as well positioned in the current margin environment. Valero's stock is associated with a projected 13% FCF yield in 2026 and a 10% FCF yield in 2027.
- Marathon Petroleum (MPC) - The bank is constructive on Marathon's steady midstream distributions, its jet fuel optimization initiatives at El Paso and Robinson, and the company's capital return profile. Marathon's stock is linked to an 8% and 7% capital returns yield in 2026 and 2027, respectively.
- Delek US Holdings (DK) - For investors with a down-cap focus, Goldman Sachs highlights Delek for its upside potential driven by small refinery exemptions, improvements in underlying refining performance and midstream earnings growth.
- Par Pacific Holdings (PARR) - The bank favors Par Pacific for its West Coast exposure and expects positive second-quarter estimate revisions supported by the earnings contribution of the Hawaii refinery.
European selections
Goldman Sachs also identifies two European refiners as preferred plays. Repsol and HelleniQ Energy are highlighted for favorable middle-distillate market dynamics, diversified crude sourcing and undemanding valuations. The bank further sees longer-term upside for these names from potential biofuels growth and a recovery in petrochemical margins.
Implications
The bank's selections reflect a focus on companies that can convert tight product markets into improved free cash flow and shareholder returns. Middle-distillate exposure, crude sourcing flexibility and the ability to capture coastal and Gulf-Coast premiums are central to Goldman's assessment. Investors should weigh asset quality, capital programs and short-term operational risks when evaluating exposure to the refining complex.