A more upbeat outlook for the oil market could lead to more upside for Valero Energy shares, according to Goldman Sachs. The firm upgraded the refiner to buy from neutral and hiked its price target to $154 from $127, implying 18% upside from Monday’s close. “We believe supply/demand dynamics have improved and point to two key developments: (1) OPEC+ announced adding incremental supply into the market and (2) demand has held in better than expected,” analyst Neil Mehta wrote in a Tuesday note to clients. “Given these developments, we see a more constructive refining backdrop and view Valero as a primary beneficiary.” VLO XLE YTD mountain VLO vs. XLE, year-to-date Mehta thinks that improving supply and demand fundamentals should support continued growth in the name from here, seeing OPEC+ raising output as well as oil demand and consumption growing globally over the coming years. The analyst added that Valero’s Gulf Coast exposure helps make it a beneficiary of the improving crude outlook. Beyond that, he holds an optimistic view of the supply side for refiners specifically. Mehta noted that larger refinery closures — such as LyondellBasell’s in Houston — should “partially offset capacity additions” and be beneficial for Valero. “We expect to see continued improvement in Gulf Coast margins, further supported by wider light-heavy crude differentials,” Mehta also wrote. The upgrade comes as shares have already risen more than 6% in 2025. The Energy Select Sector SPDR Fund (XLE) has fallen more than 1% in the same period, in contrast. Mehta’s bullish call puts him in the majority of Wall Street analysts. LSEG data shows 16 of 20 analysts rate the stock a buy or strong buy. The average price target implies upside of 9%.
