LongApril 22, 2026
Praetorian Capital on Refiners Basket
Thesis
The refining sector is positioned for high returns due to a tight market caused by underinvestment, refinery shutdowns, and reduced Chinese exports. If global economic growth or a weaker dollar boosts energy demand, a refinery bottleneck could lead to significant profits for the two diversified, financially sound refiners owned by the fund.
“It takes many years to build a new refinery. Meanwhile new oil supply can come online far faster, leading to a bottleneck that extracts most of the pricing economics in a demand recovery. We own 2 diversified refining companies with clean balance sheets, a strong propensity for buybacks, and a valuation that is at a substantial discount to replacement cost of their refineries.”
Key risks
- A global recession could reduce demand for refined products.
- An increase in refining capacity from new builds or policy changes could alleviate the bottleneck.