Is Valero Energy One of the Best Oil Stocks to Buy Right Now?

Goldman Sachs (NYSE: GS) recently increased its price target for Valero Energy (NYSE: VLO) from $203 to $237. Is that enough to make the stock a buy? There are a number of factors to consider before you step aboard this U.S. refiner.

Valero is well-positioned right now

The first key fact you need to remember is that the energy sector is highly volatile, moving dramatically and often quickly, both up and down. The geopolitical conflict in the Middle East has disrupted the energy sector, sending oil and gas prices higher. However, because of the nature of the conflict, it has also led to a supply and-demand imbalance in the refining sector.

Image source: Getty Images.

This is where Valero comes in, as it turns oil and natural gas into usable products like gasoline. Wide spreads are a huge benefit to a company like Valero. This helps explain why Goldman Sachs' view of the business has improved. While the company won't report first-quarter earnings until the end of April, it is highly likely that the update will be a positive one. So, directionally, Goldman Sachs is likely spot on.

Things can change quickly in the energy sector

There are two problems with Goldman Sachs' updated view. The first and most important is that, as of this writing, Wall Street is already pricing Valero's stock above the investment bank's new price target. So it looks like Wall Street is aware of Valero's opportunity, and it has been priced into the shares.

From a bigger picture perspective, however, investors need to keep the fundamental volatility of the energy sector in mind. Notably, Valero Energy has yet to report first-quarter earnings, and investors are already pricing in strong results. When the geopolitical conflict in the Middle East ends, Wall Street is likely to react similarly, quickly selling shares of companies like Valero in anticipation of weaker financial results. If you buy Valero stock today, you need to be prepared for the flip side when its business faces headwinds.

Now is a time for caution in the energy patch

Valero is a well-respected refiner, so the issue here isn't with the business itself. The problem is that the energy sector is being driven by emotions and news flow. With Valero's stock up roughly 50% so far in 2026, most investors should probably tread with caution. Even though Goldman Sachs' updated view has shifted in a more positive direction, it still appears that much of the good news is already priced into Valero's stock.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.