Ampol Ltd (ASX: ALD) shares surged to a multi-year high in morning trade as investors reacted to the fallout from Viva Energy's Geelong refinery fire.
The Ampol share price climbed as high as $34.85 earlier in the session before easing back to $33.24, where it remains up 0.33% at the time of writing.
Even with that intraday pullback, the stock is still up roughly 61% over the past 12 months, leaving it among the ASX 200's strongest blue-chip performers.
The rally points to rising expectations that Ampol could benefit from stronger refining margins while Geelong remains disrupted.
Here's what investors are watching.
Image source: Getty Images
Geelong refinery fire puts the spotlight on Lytton
The main driver is the overnight fire at Viva Energy Group Ltd (ASX: VEA) Geelong refinery in Victoria, which has already pushed its shares into a trading halt.
Recent reports suggest the disruption could last months, with petrol production expected to be affected.
That immediately lifts the focus onto Ampol's Lytton refinery in Brisbane, now the country's only other major operating refinery.
Together, the two refineries account for a significant share of Australia's transport fuel production.
With Geelong expected to run below normal levels, investors are increasingly looking at what that could mean for refining margins at Lytton.
A tighter local fuel market is likely to support Ampol through stronger domestic refining margins and higher demand across its supply network.
A strong run was already underway
Ampol shares had already been trending higher over recent months as refining conditions improved and sentiment across energy stocks strengthened.
The stock's 1-year gain of around 61% shows investors were already warming to the earnings recovery outlook before today's latest catalyst.
The dividend has also remained part of the appeal, with the stock still offering an attractive fully-franked yield based on its most recent payout.
Ampol paid a 60-cent final dividend.
And now, the Geelong disruption gives investors another reason to believe earnings could stay stronger in the near-term.
Foolish Takeaway
I still think Ampol has room to stay well supported while refining conditions remain favourable.
The market is now looking beyond the immediate Geelong outage and more at what a tighter domestic supply could mean for Lytton's margins over the next few months.
The dividend yield also continues to make the stock attractive, especially while earnings momentum across the downstream business is improving.
After a 61% run over 12 months, I would expect gains to become more measured, but the setup still looks supportive if the disruption lasts longer than expected.
