After doubling their stock prices this year, Valero Energy (VLO.US) and Marathon Petroleum (MPC.US) have been downgraded by Jefferies: Their valuations are now considered too high.

According to information from Zhitong Caijing APP, Jefferies has downgraded refiners Valero Energy (VLO.US) and Marathon Oil (MPC.US) from “Buy” to “Hold”, with target prices of $401 and $413 respectively, stating that after more than doubling in the past year, the valuations of these two companies now look high.

In a report, Jefferies analysts led by Lloyd Byrne stated: “There is no clear solution to the tight refining fundamentals... What could disrupt the current cycle? We believe that refined product prices would need to rise further and remain elevated to stimulate demand destruction, otherwise government intervention may be necessary.”

The analysts wrote: “Investors are focusing on the possibility that the United States may implement a refined product export ban before the midterm elections, and political support for such a ban has been growing. While this would be detrimental to global stability and have economic impacts in the US, with major powers worldwide increasingly prioritizing national interests, the US may follow suit.”

Byrne believes that the risk-reward for refiners supports holding existing positions while waiting for market volatility to bring more opportunities to increase holdings; even if forward prices remain high out to 2029, current stock prices still imply that mid-cycle profit margins in 2030 will be close to 2025 levels.

As of Tuesday’s US market close, Valero Energy ended down 4.10% at $377.14, still up 135% so far this year; Marathon Oil ended down 3.16% at $389.68, still up 142% year to date.