Barclays on U.S. Independent Refiners: PC Weekly R&M Margin Analysis
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Up: 11 | Down: 12 | New: 13
Rating Summary:
17 Buy, 3 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Barclays on U.S. Independent Refiners: PC Weekly R&M Margin Analysis
Analyst, Paul Y. Cheng, said, "US refining margins were up $1.0/bl average last week. The Midwest showed the biggest increase (up $2.9/bl), followed by the West Coast L.A. Basin (up $2.8/bl). On Friday (11/25), GC-6-3-2-1 cash margin (LLS as the feedstock instead of WTI) stood at -$1.0/bl (down $0.3/bl)."
"Following the latest announcement of the Seaway pipeline sale and its partial reversal by early next year, the Brent/WTI spread has dropped down to approximately $10/bl from a 3Q11 average of $25.0/bl and a QTD average of $19.9/bl. From now until the reversal, we expect the spread will remain at the current level, experience a short rise in 1Q12, and eventually settle at approximately $5-6/bl when sufficient new pipeline capacity comes on stream. We continue to like Tesoro (NYSE: TSO), Valero (NYSE: VLO), and Marathon Petroleum (NYSE: MPC) based on our analysis of a $5/bl Brent/WTI differential as we believe the market has underestimated the group's strong earnings power and valuation in the coming seasonal trade. Based on current inventory trends, the large excess in light product inventories has now diminished and we expect light product margins to improve from current levels over the next several weeks."
"Quarter to date 4Q11 margins are approximately $5.9/bl lower than 3Q11 and $6.4/bl higher than 4Q10 levels."
Analyst, Paul Y. Cheng, said, "US refining margins were up $1.0/bl average last week. The Midwest showed the biggest increase (up $2.9/bl), followed by the West Coast L.A. Basin (up $2.8/bl). On Friday (11/25), GC-6-3-2-1 cash margin (LLS as the feedstock instead of WTI) stood at -$1.0/bl (down $0.3/bl)."
"Following the latest announcement of the Seaway pipeline sale and its partial reversal by early next year, the Brent/WTI spread has dropped down to approximately $10/bl from a 3Q11 average of $25.0/bl and a QTD average of $19.9/bl. From now until the reversal, we expect the spread will remain at the current level, experience a short rise in 1Q12, and eventually settle at approximately $5-6/bl when sufficient new pipeline capacity comes on stream. We continue to like Tesoro (NYSE: TSO), Valero (NYSE: VLO), and Marathon Petroleum (NYSE: MPC) based on our analysis of a $5/bl Brent/WTI differential as we believe the market has underestimated the group's strong earnings power and valuation in the coming seasonal trade. Based on current inventory trends, the large excess in light product inventories has now diminished and we expect light product margins to improve from current levels over the next several weeks."
"Quarter to date 4Q11 margins are approximately $5.9/bl lower than 3Q11 and $6.4/bl higher than 4Q10 levels."
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