Valero, HollyFrontier, Marathon upgraded by J.P. Morgan on wider oil spreads

J.P. Morgan is the latest investment banker to turn bullish on refiners, upgrading HollyFrontier (HFC +2%), Valero Energy (VLO +1.8%) and Marathon Petroleum (MPC +0.9%) on its expectation for a larger difference between Brent and West Texas oil prices.

The firm revises its view on oil prices, forecasting Brent prices averaging $105.50/bbl for 2014 and $100.30 for 2015 vs. WTI prices of $91.50/bbl for 2014 and $85.30 for 2015, suggesting a $14-$15 differential, which should increase U.S. refining margins.

In particular, the firm believes HFC's inland refining system is "well positioned to benefit from growth in production of disadvantaged inland North American crudes, and expect(s) HFC to capture Brent-WTI price differentials as higher gross margins across the majority of its throughput."

HFC is upgraded to Overweight from Underweight, VLO and MPC are raised to Neutral from Underweight, and Phillips 66 (PSX +1.5%) and Tesoro (TSO +1.2%) are maintained at Overweight.

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Comments (2)
  • Ruffdog
    , contributor
    Comments (3671) | Send Message
    with Iran and others increasing production I see brent going lower.
    9 Dec 2013, 11:09 AM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (11638) | Send Message
    It has much more to do with the US crude export ban and light-sweet crude refining capacity hitting a wall as my latest article explains:



    Increaesed Iranian production may be a future event, but it having little to no impact presently.
    9 Dec 2013, 11:36 AM Reply Like
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