Viva Energy shares have risen 1.5 per cent despite a weak overall performance in the sharemarket. This increase follows a statement from UBS suggesting that the Geelong Oil Refinery owner could benefit from elevated Asian refining margins, driven by ongoing tensions in the Middle East. Viva Energy is an Australian company that operates a network of service stations and also owns the Geelong Oil Refinery. The company is a key player in the Australian fuel supply chain.
The conflict is disrupting transit through the Strait of Hormuz, leading to higher margins for jet fuel and diesel throughout Asia. Although Viva Energy sources less than 10 per cent of its crude oil from the Middle East, Australia depends significantly on refined imports from Asia. In 2025, Viva Energy imported 75 per cent of its diesel and 83 per cent of its jet fuel sales.
According to UBS, rising Asian product cracks present a potential boost to Viva Energy’s earnings from its Geelong refinery. The investment bank estimates that the first-quarter 2026 refining margin could reach $US10.7 per barrel. This figure is approximately 14 per cent above consensus estimates, potentially adding around $20 million to the company’s quarterly EBITDA.
Additional upside may arise if China restricts its refined product exports, which could tighten regional supply and further increase margins in Australia. This, combined with the anticipated outcome of the Fuel Security Services Payment review, could provide additional margin support of $3.50 to $4 per barrel. UBS has maintained a Buy rating on Viva Energy, with a price target of $2.40, noting that the stock is currently trading below its historical earnings multiple.
