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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 (1626) | 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 (9064) | 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:

     

    http://bit.ly/1iPWsw5

     

    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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