Are Crude Oil Refining Stocks in a Sweet Spot for Energy Investors?

Are Crude Oil Refining Stocks in a Sweet Spot for Energy Investors?

Research  these Stocks on Kapitall’s Playground Now

research now

MinyanvilleOil refiners are taking advantage of increased US crude oil production.

If you ever get a chance to visit a refinery, do so. I will assure you of one thing, and that is you will depart the premises wondering how these things ever stay intact. Say “hot hydrocarbons under pressure” to yourself over and over to enhance the experience. Consider there are 206 refineries in North America and 43 of them have some form of unplanned outage at the time of this writing, including three whose stint on the DL is ascribed to “explosion/fire.”

This is somewhat different than the imbalance seen for farmers. If a drought hits, say, the western corn belt, prices rise but only a few farmers can take advantage of it as their crops have wilted, too. If a refiner’s neighbor starts putting on a fireworks show, well, let’s just say one firm’s unplanned outage is another firm’s unplanned price boost.

Strong Recent Performance

The S&P Refiners group, home to Valero (VLO), Tesoro (TSO), Phillips 66 (PSX), and Marathon (MPC), has had some long periods of out- and underperformance in recent years. They were taking it on the chin vis-à-vis the broad market between March and September 2013, as crude oil acquisition costs rose and gasoline demand was slack.

The higher crude oil feedstock costs led refiners to draw down inventories and postpone incremental purchases of crude oil; this process led first to backwardation in the crude oil forward curve, and then to a narrowing of the spread between Brent and West Texas Intermediate crude oil.

By September, the whole process started to reverse as rising distillate fuel oil exports led to expanded refining margins from the revenue side, and as increased availability of shale oil from Texas’ Eagle Ford formation expanded margins from the cost side. Relative performance reversed and has advanced by 19.9% since September 23, 2013. This is in a mature industry, not some high-tech gizmo that will be here today and gone tomorrow.

12 4 Simons1

Those rising exports of distillate, a category inclusive of heating oil, diesel fuel, and jet kerosene, are an interesting phenomenon themselves. The US has been willing, by law, to be very restrictive of crude oil exports on the indefensible grounds that such a move would benefit US consumers.

This logic led to Alaska North Slope crude oil being shipped to west coast refineries when it could have been shipped more economically, after the costs of retrofitting for the highly naphthenic crude oil were taken into account. Similar and equally foolish arguments have been made with respect to natural gas exports; one might think few in Congress are familiar with the 18th century principles of comparative advantage in trade.

Refiners can add value to crude oil and then export these products. This does not work as well for less-fungible gasoline, though. The net effect is higher refinery utilization rates than would exist with slow US demand growth, gasoline production as a credit to the export of distillates, and downward pressure on gasoline prices for the US motorist.

Refiners are capturing the economic rent of increased US crude oil production and are aiding the US trade balance as a positive externality. Not bad for a day’s work, is it?

Click on the interactive chart to view yearly returns over time. 

Do you see investing opportunities in oil refining stocks? use the list below to begin your analysis. 

1. Valero Energy Corporation (VLO, Earnings, Analysts, Financials): Operates as an independent petroleum refining and marketing company. Market cap at $24.29B, most recent closing price at $46.77.


2. Tesoro Corporation (TSO, Earnings, Analysts, Financials): Engages in refining and marketing petroleum products in the United States. Market cap at $7.51B, most recent closing price at $57.42.


3. Phillips 66 (PSX, Earnings, Analysts, Financials): Operates as an independent downstream energy company. Market cap at $41.72B, most recent closing price at $70.60.


4. Marathon Petroleum Corporation (MPC, Earnings, Analysts, Financials): Engages in refining, transporting, and marketing petroleum products primarily in the United States and internationally. Market cap at $25.06B, most recent closing price at $86.99.



(Written by Howard Simons for Minyanville. You can find the original here.)

Read more:

SPX and Dow Updates: Dow Triggers a Warning Signal

The Last Big-Dog Economic Number of the Year: The Friday Jobs Report

Analyze These Ideas: Getting Started

Dig Deeper: Access Company Snapshots, Charts, Filings


© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

Securities products and services are offered by Kapitall Generation, LLC – a FINRA/SIPC member. 


14 responses to “Are Crude Oil Refining Stocks in a Sweet Spot for Energy Investors?”

  1. jassivca says:

    Welcome for the world regarding gym floor! Gym floor UK can be a hub from to now have the latest type rubber matting to your home. The plastic flooring gives a classy look in your area. With gym floor UK, we give you the very best quality material.gym flooring UK

  2. www.busine says:

    . A good company will attempt as well as automate as numerous techniques as you possibly can to their company. Whenever a business proprietor automates techniques this locations him/her in a distinctive placement <a href="” target=”_blank”>

  3. says:

    Online movie is rapidly becoming probably the most valuable resources for achieving candidates inexpensively and successfully. In addition to some traditional work description, employers can now speak straight with applicants and clarify the intricacies of the position prior to ever conference them in person <a href="” target=”_blank”>

  4. www.myne says:

    The warehouse management solutions are not care for different things that you buy from the retail chains and you can even modest ones. Along these lines, one need to be cautious while it comes to buying this software arrangement as this influences the wellbeing of both the warehouse labourers and items <a href="” target=”_blank”>

  5. says:

    Each and every business proprietor must have a company website design integrating a good e-commerce buying abilities as well as program automation. E-commerce buying buggies increases income and gaze after a proper major border for that business proprietor <a href="” target=”_blank”>

  6. says:

    We believe it is reasonable to express that people (business community) are gradually beginning slide aside to the joyful nature. Therefore rather than defeating aside about the typical drum, all of us believed we may take a moment away in order to reveal to you a few of the down and dirty resources as well as

  7. francoise-g says:

    Approximately more than 46% associated with on the internet Australians right now personal the cellular smartphone gadget. These types of numbers becoming cited within This summer 2011, We care state which through the 12 months finish it will likely be more than

  8. armin says:
    Everyone is affected by fashion to some extent. In the era belonging to the early supermodel age, fashion could be categorized by glamour or commons. At present, fashion is fast, trendless, comfortable, and personal.

  9. armin says:
    Cost behavior is the analysis of how costs change in a business in response to actions. It can be used to prepare budgets, determine selling prices, pay dividends to stockholders and predict profits over time.

  10. armin says:
    Financial literacy is the ability to understand how money works in addition to being a skill everyone should have and hone as they live. On Canada, the government is starting to place greater emphasis on it skill among it population.

  11. Joey says:

    The site shows you the same method that I would use if I came to visit you in your house, in fact many of the videos are live consultations. It’s like having me right there with you, showing exactly what I do and how I do it.
    doggy dans online dog trainer

  12. maidservices says:

    That is a one-time detailed treatment in addition to cleaning connected with specific areas in your house. It is usually arranged seeing that spring clean-up, before or maybe after opertation. One-off may be scheduled if a person wishes to gauge this expertise connected with cleaners before using them all the company dubai

  13. This post is really informative and this post help me a lot.Keep updating. cleaning makka

Leave a Reply

Your email address will not be published. Required fields are marked *

  • See Most Recent Articles