Goldman Sachs has highlighted three U.S. oil refiners as its top sector selections, pointing to a combination of improving refining economics and shareholder-friendly capital return programs. The bank expects the sector to receive some near-term tailwinds related to the Middle East war, as major economies prepare to deploy emergency oil reserves to offset supply disruptions arising from the conflict.
In its sector assessment, Goldman Sachs underlined strengthening refining dynamics on the West Coast and prioritized firms that operate premium assets, generate robust cash flow and present strong frameworks for returning capital to shareholders.
HF Sinclair
Goldman Sachs retains HF Sinclair among its top picks despite recent leadership changes that have exerted pressure on the stock. The firm characterizes HF Sinclair shares as deeply discounted and expects the company to benefit from tightening West Coast market conditions. Beyond refining, HF Sinclair contributes earnings from Lubricants, Midstream and Marketing divisions, which Goldman views as meaningful non-refining cash flow sources.
Goldman Sachs detailed a specific capital project at HF Sinclair's El Dorado complex designed to improve plant reliability, enhance gas-to-oil recovery and raise heavy crude processing capacity by roughly 10,000 barrels per day. The project carries a total capital requirement near $55 million, with about $37 million already expended in 2025, and is forecast to add incremental annual EBITDA of approximately $25 million to $30 million.
The bank also drew attention to HF Sinclair's Small Refinery Exemption optionality. Management has signaled the potential for 400 million to 600 million Renewable Identification Number units to be exempted annually, an element Goldman Sachs cites as significant optional value. Recent corporate developments include a fourth-quarter adjusted earnings beat and a joint venture announced for 30 retail sites across the Rockies and Southwest, even as the company manages a CEO leave of absence and a broader leadership transition.
Valero Energy
Valero earns praise from Goldman Sachs for its premium asset footprint and strategically advantaged Gulf Coast position. The bank notes Valero's capacity to process at least 240,000 barrels per day of Venezuelan crude, a stream the company historically ran between 2016 and 2019. Upgrades at the Port Arthur complex - specifically a coker project - have enhanced the facility's ability to handle heavier and more acidic crudes.
Goldman Sachs projects upside relative to consensus for 2026-2028 and highlights Valero's financial policy, which targets an adjusted cash flow from operations payout ratio of 40 percent to 50 percent. Under this framework, Goldman expects Valero to return roughly $4.9 billion to shareholders in 2026 and about $5.2 billion in 2027, implying capital returns yields of approximately 7 percent and 8 percent in those years, respectively.
On a recent results basis, Valero exceeded fourth-quarter 2025 estimates, reporting earnings per share of $3.82 on revenue totaling $30.37 billion.
Marathon Petroleum
Goldman Sachs also cites Marathon Petroleum as a top pick, observing that while the stock has appreciated, its West Coast exposure and jet fuel production remain underappreciated by the market, according to the bank. The brokerage values Marathon's pattern of sustaining and potentially increasing quarterly cash distributions. Company guidance referenced by Goldman includes management's target of 12.5 percent distribution growth over a two-year period.
Goldman Sachs estimates Marathon will return around $4.6 billion to shareholders in 2026 and about $4.8 billion in 2027, figures that correspond to an implied capital returns yield near 7 percent in each year. Marathon's most recent reported results showed fourth-quarter 2025 earnings of $4.07 per share, which surpassed analyst forecasts.
Context and Analyst Focus
Across its recommendations, Goldman Sachs concentrated on refining dynamics that are improving regionally, particularly on the U.S. West Coast, and on firms whose asset quality and integrated businesses support resilient cash flow. The bank also incorporated the potential effects of global reserve releases tied to the Middle East conflict as a factor that could create short-term market relief from supply shocks.
Investors should note that Goldman Sachs' selection criteria emphasized premium asset portfolios, the capacity to capture upside from heavy crude processing and explicit capital return programs. These elements underpinned the firm's positive stance on HF Sinclair, Valero and Marathon.
Note: This article preserves the factual information provided and reports on the companies and projections as described by Goldman Sachs, including results and capital spending figures disclosed by the companies.