Oil refining shares HelleniQ and Motor Oil hit ceiling - What should investors do?

A minor pull-back in oil prices on Wednesday, 29/10, was enough to trigger pressure on the shares of the two refineries trading on the Hellenic Exchange, illustrating the precarious valuations of HelleniQ Energy and Motor Oil. This comes after a soaring price rally driven by unprecedented profit growth, fueled by skyrocketing crude prices and refining margins—largely the result of geopolitical turmoil in the Middle East, reshaping energy market dynamics.

Dividends and the supply chain

The core question, however, centers on what happens next. It is obvious that extraordinary profitability yields highly favorable effects for corporate balance sheets, as both companies expect to achieve substantial debt deleveraging while enabling generous dividend distributions. It is equally clear that even if Middle East tensions were resolved overnight, normalizing the broader global supply chain would still require considerable time.

De-escalation and corporate insiders

Nevertheless, oil prices and refining margins are set to normalize, meaning neither company can replicate this year's record earnings in the coming period. Corporate insiders appear to recognize this reality first, which explains why Motor Oil executives have been liquidating stock. Most recently, Mr. Petros Tzannetakis achieved a peak valuation by selling 5,000 shares at a historic high of 70 euros. Executives at HelleniQ have engaged in similar insider share sales.

An unexpected rally

What is genuinely driving the refining landscape? While global oil demand faces long-term structural declines due to expanding Renewable Energy Sources (RES), virtually no market participant anticipated this aggressive price surge. Recognizing upcoming structural pressures, refiners had already initiated portfolio diversification, deploying capital into renewables, energy storage, and waste management. Consequently, the Middle East crisis acted as a sudden windfall, creating market distortions and inventory deficits that propelled prices and refining margin spikes.

Shortages and refining margins

In Europe, physical deficits persist in diesel and aviation jet fuel. European jet fuel inventories are notably constrained, holding less than thirty days of operational coverage. This backdrop has dramatically benefited Greek refineries producing jet fuel, where refining margins have expanded to three times their historical mid-cycle average of 6 to 7 dollars. Financial disclosures clearly reflect this outperformance. Yet such elevated conditions cannot endure indefinitely—unless geopolitical conflict deepens and physical markets face severe depletion. A diplomatic resolution remains the most probable outcome, in which case normalizing prices and margins will significantly compress refinery profit margins.

Pricing in future realities

Under that scenario, valuation contractions for stocks priced on cyclicality rather than stable earnings multiples will be pronounced. Capital markets have fully priced in fiscal 2026 earnings performance. The primary factor offering downside support remains dividend expectations, backed by strong cash flow generation and balance-sheet deleveraging. Effectively, this operational window narrows through the first half of 2027—which will represent a distinct environment if US-Iran conflicts settle. Naturally, should an agreement materialise permitting broader Iranian crude market access, the downward trajectory on global fuel prices will be far more decisive, altering oil market valuations.

Nikos Karoutzos

nkaroutzos@gmail.com

www.bankingnews.gr