UPDATE: Oppenheimer Upgrades Four Refining Stocks to Outperform (HFC) (MPC) (PSX) (TSO)

Oppenheimer upgraded HollyFrontier (NYSE: HFC), Marathon Petroleum (NYSE: MPC), Phillips 66 (NYSE: PSX), and Tesoro Petroleum (NYSE: TSO) from Perform to Outperform with price targets of $50, $120, $95, and $105, respectively. Valero Energy (NYSE: VLO) was maintained at Outperform with a price target of $70 (from $65).

Analyst Fadel Gheit noted favorable industry fundamentals and attractive valuations.

Gheit explained, "We believe the stock performance will continue to reflect wide crude differential, low natural gas prices, growing refined product exports, improved petroleum demand outlook, and continued MLP growth. Despite the strong stock performance since 2010, valuations remain attractive, and financial flexibility has improved with declining stay-in-business spending and rising growth investments in crude flexibility, product exports, and MLP growth. This allowed refiners to reduce debt, grow the dividend and repurchase their own shares, which we believe will continue."

"We expect the Brent-WTI differential to fluctuate in the $4-$8 range, which coupled with improving logistics is a huge competitive advantage to US refiners with processing flexibility to take advantage of many crude sourcing options. Rising global tension boosts Brent price, while increased domestic oil production depresses WTI crude price. Lifting the export ban could increase WTI price and narrow the differential," added the analyst.

For an analyst ratings summary and ratings history on HollyFrontier click here. For more ratings news on HollyFrontier click here.

Shares of HollyFrontier closed at $41.71 yesterday.

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