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This Week's Bonus Article As Energy Surges on Crack Spreads, Consider Taking Gains on 2 Small Cap Oil StocksSubmitted 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.
- Special Report: Elon Musk: This Could Turn $100 into $100,000
Oil and gas stocks have surged since the start of the Iran conflict, largely because the Persian Gulf is so important to global oil flows. Roughly 20 million barrels per day transit the Strait of Hormuz — about 20% of global supply. But the key story for investors goes beyond rising crude prices: refiners are benefiting from an unusual gap between crude and refined-product prices — diesel, gasoline and jet fuel. Known as crack spreads, these gaps have propelled downstream oil stocks, especially in the United States. Gold surged from $2,063 in January 2024 to an all-time high of $5,595 in January 2026 - but 'Canadian Gold' left ordinary gold, silver, the NASDAQ, and the S-P 500 in the dust. Known as 'the Warren Buffett of Canada,' one of the world's most connected investors is loading up on this asset. Find out what Canadian Gold is and why it has outperformed since inception. Click here to discover what Canadian Gold is and why it outperforms That dynamic makes two small-cap refiners worth a closer look, because their recent gains are closely tied to today's unusually favorable spreads — gains that could unwind quickly if conditions normalize. Why Crude Prices Can Matter Less for Downstream Companies If you've stopped at a gas station recently, you've probably noticed how quickly prices have jumped. According to AAA, the average national fuel price in the United States is currently $3.94 — up more than $1 in just a month. Unless you use it regularly, you may have paid less attention to diesel prices, which have risen even faster. Crack spreads illustrate why the energy sector is divided into upstream, midstream and downstream segments: - Upstream: Companies that extract oil and therefore directly benefit from higher crude prices.
- 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 simply from high or low oil prices. Instead, profitability depends on the crack spread between crude and refined products. Oil prices have surged since the conflict began, but downstream firms have been insulated because crack spreads expanded after Persian Gulf refining capacity went offline, boosting refiners' margins. Many market participants had expected a short conflict, but now that the fighting looks entrenched, stocks in this industry have moved sharply higher. That repricing, however, overlooks margin risks that could appear just as quickly as the crack-spread surge did. Some catalysts to watch for include: - When the Strait of Hormuz reopens: If crude flows are restored slowly but refined-product flows normalize faster, wholesale prices for fuels could fall while crude remains elevated — compressing crack spreads and squeezing refiner margins.
- Demand destruction from a prolonged shock: Sustained high crude prices could slow economic activity, reducing demand for refined products. For example, a drop in travel would cut jet-fuel purchases and hurt refiners' revenues.
On top of these risks, governments are releasing crude from strategic reserves to limit price spikes, which could help normalize spreads. Meanwhile, China's policy choices matter: 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 Normalize Large-cap refiners often have hedging programs and stronger balance sheets to absorb volatility. Small-cap refiners typically lack those safety nets, so a rapid crack-spread reset could trigger a sharp revaluation. Here are two small-cap downstream stocks where profit-taking could be prudent. CVR Energy: Beware the False Breakout CVR Energy Inc. (NYSE: CVI) is already up more than 60% this month thanks to both 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 used for crop nutrients. In Q4 2025, CVR reported a year-over-year revenue decline of 7%, so the recent price shock provides a timely boost. CVI shares have pushed through their 50- and 200-day moving averages over the past few weeks, but the rally now looks fragile. 
The Relative Strength Index (RSI) is above 76 — firmly in overbought territory — and nearly 6% of the float is sold short, suggesting short-covering may have amplified the move. Despite the rally, five of the six analysts covering CVI rate the stock a Sell. PBF Energy: Earnings Beat Could Be a Ticking Clock Unlike CVR, PBF Energy Inc. (NYSE: PBF) got a company-specific tailwind from its Q4 2025 results, which helped fuel a parabolic rally. While revenue missed targets, EPS of $0.49 beat expectations for a $0.15 loss. Management said crack spreads were already benefiting the company before the initial strikes related to the Iran conflict. The stock is up more than 80% so far in 2026, including a gain of over 40% in the past month alone. 
Now that the earnings tailwind is fading, technical headwinds are appearing. With short interest above 20%, trading has been driven by both bullish and bearish forces, pushing the stock into RSI overbought territory and forming a potential double-top pattern on the daily chart. Insiders sold more than $300 million of PBF shares in Q1 with little offsetting buying, and analysts still assign the company a Sell rating with a consensus price target more than 30% below current levels. |
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