Refiners mixed after yesterday's drubbing, Credit Suisse not optimistic


Refiners mostly continue to languish after shares were hammered yesterday as the Brent-WTI spread narrowed to its tightest level since last October.

Credit Suisse isn't too excited about the near-term outlook; while March-April could see some widening of the spread given the transfer of inventory from Cushing to the Gulf, summer crude spreads should remain tight given as East of Rockies refineries ramp up for peak gasoline demand.

On individual stocks, the firm says Western Refining (WNR -3%) and Phillips 66 (PSX +0.1%) should benefit from other businesses, while Tesoro (TSO +1.1%) could benefit from being recognized as a “Gulf Coast Refiner” but Delek US (DK -3.5%) needs to show signs of earnings improvement before it's worth buying.

ETFs: XLE, ERX, OIH, VDE, ERY, DIG, DUG, XES, IYE, IEZ, PXJ, PXI, PSCE, FENY, FXN, RYE, DDG.

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Comments (4)
  • Jbacle
    , contributor
    Comments (24) | Send Message
     
    It would be nice to read an article about the market impact of the new Cushing to Gulf crude pipeline, both on domestic refined product prices and the volume of refined products exports. If WTI and Brent can be mixed and processed in the heavy oil refiners around the gulf, what will be longer term impact on refiner profits?
    1 Mar 2014, 10:47 AM Reply Like
  • Fracjob
    , contributor
    Comments (1960) | Send Message
     
    Surprised that the refiners in general have held up as well as they have. A strong market is part of the reason, but expect that the refiners will be especially vulnerable during high beta volatility market weakness.
    1 Mar 2014, 12:45 PM Reply Like
  • Hendershott
    , contributor
    Comments (1741) | Send Message
     
    JB, you got it. The reversal of the Seaway and the new southern part of the XL. Drain Cushing, or at least start the process of unplugging the bottleneck. WTI and Brent gravitate toward each other, WTI becoming less stranded.
    1 Mar 2014, 06:07 PM Reply Like
  • Blue22
    , contributor
    Comments (449) | Send Message
     
    Reality Check! I am ever confused how Brent continues to have such a life or death impact on our markets. Did anybody notice when we beat Middle East oil to an irrelevant status? When you factor in the cut volumes from Venezuela and Africa, and the fact that Saudi investors and others are big time owners and investors of a nice chunk of our refineries, I would venture to say that the Brent Crude Marketing Factor cancels itself out, rendering it a paper-only market.

     

    It makes no sense to use obsolete numbers to calculate and regulate WTI value-spreads. Oh damn I forgot! Our Fed works on the same principal: Take the so-called money from this pocket, put it in the other pocket and no real money ever exits in the process. While that prestidigitation is distracting our brilliant markets, billions of real dollars seems to vanish leaving only the telltale tracks of another trillion dollars on the debt!

     

    There are three new, massive pipeline systems bringing nearly twice the amount of crude into Texas. The Cushing bottleneck is solved forever and still we can't come close to keeping up with the refineries. That is all because the refiners and the oil companies and pipeline companies have invested hundreds of billions of dollars in the US and Canada to make this miracle possible! but instead of encouraging them to actually make some real profits from their years of investing, our government blocks approval of critical systems billions of dollars and years after the project investments.

     

    Time to wake up! How much energy is being generated this winter from the solar arrays, which kill everything over, under and around them? I sure would like to know the facts on breakdown of windmill generators, just look at a picture of a field of them and gosh, a large percentage don't work even in the summer time! Have you heard of deicing aircraft wings and propellers? I submit that this long, icy winter has probably destroyed a vast number of wind-energy sections of the energy grid. The difficulty of repairing a wind machine is astounding! It's possible we have lost the majority of the investment countrywide. Ice has similar impacts to the health of solar arrays.
    2 Mar 2014, 03:44 AM Reply Like
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