Credit Suisse Upgrades CVR Refining (CVRR) to Neutral
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Credit Suisse upgraded CVR Refining (NYSE: CVRR) from Underperform to Neutral with a price target of $9.00 (from $7.00), citing a change in leadership at the EPA.
Analyst Edward Westlake commented, " We don’t think RFS2 is going away (which could be wrong). However, there will be a change in leadership at the EPA. The new leaders of the EPA may bow to pressure from refiners to shift the point of obligation. Shifting the obligation would require an administrative EPA rule making but the broader intent of the RFS2 would remain intact. This would place the RIN obligation closer to where most biofuel is blended rather than the structural short that currently exists at the Independent Refiners. This would likely take some of the excess out of the RIN market. An ethanol RIN is the spread required to incent blending of ethanol into the fuels market. At times when corn is expensive and oil is cheap, the RIN price should theoretically be high. When oil is high (which could happen) and corn is cheap (which looks likely), then the RIN price would be low. RIN prices will still exist if the point of obligation is shifted but independent refiners would not bear the RIN cost. It is likely that some of the RIN cost is already reflected in the gasoline crack (this will vary from regional market to regional market). However, the positive impact of lower RINS on companies like CVRR and PBF is significant. We upgrade CVRR to NEUTRAL (from Underperform) and raise our TP to $9/unit (from $7/unit)."
Shares of CVR Refining closed at $8.55 yesterday.
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