UBS on U.S. Refining: Recommend Parking Cash on Sidelines - Downgrading HFC & VLO
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Price: $36.39 --0%
Rating Summary:
10 Buy, 12 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
10 Buy, 12 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
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UBS on U.S. Refining: Downshifting to Neutral
Analyst, Craig Weiland said, "Seasonal trade playing out in full-force: 2012 has brought a host of developments that have provided near-term support to refining margins. A warmer than normal winter has allowed North American oil drilling programs to go largely uninterrupted, fostering material inventory builds at Cushing, a blow-out in WTI-Brent to ~$19/Bbl, and robust Mid Cont refining economics. Meanwhile accelerated closures in the Atlantic Basin have lifted gasoline cracks in the East and Gulf Coasts. Refining equities have responded with a 32% YTD pop, having outperformed the S&P 500 by 24%."
"Outlook from here: recommend parking cash on sidelines: While recent developments have provided near-term optimism, we see reason for caution: 1) a June start-up of the Seaway pipeline from Cushing to the Gulf should gradually offset crude oil inventory builds in the Mid Cont & narrow the WTI-Brent spread; 2) we expect unutilized capacity to be lured into action in response to strong margins, potentially filling product shortfalls; 3) recent rationalization isn’t enough: 2.6MMBbld & 2.1MMBbld are slated to start up in 2012/13; 4) demand for gasoline in the U.S. has been creeping along at lows not seen since 2001."
"Downgrading Buy rated names HolyFrontier (NYSE: HFC) and Valero (NYSE: VLO) to Neutral...We estimate the good news is priced into shares of HFC and VLO. We view the risk reward profile at current price levels as less attractive and are downgrading shares to Neutral from Buy. We’ve retained Neutral ratings on Tesoro (NYSE: TSO) and Western Refining (NYSE: WNR)."
Analyst, Craig Weiland said, "Seasonal trade playing out in full-force: 2012 has brought a host of developments that have provided near-term support to refining margins. A warmer than normal winter has allowed North American oil drilling programs to go largely uninterrupted, fostering material inventory builds at Cushing, a blow-out in WTI-Brent to ~$19/Bbl, and robust Mid Cont refining economics. Meanwhile accelerated closures in the Atlantic Basin have lifted gasoline cracks in the East and Gulf Coasts. Refining equities have responded with a 32% YTD pop, having outperformed the S&P 500 by 24%."
"Outlook from here: recommend parking cash on sidelines: While recent developments have provided near-term optimism, we see reason for caution: 1) a June start-up of the Seaway pipeline from Cushing to the Gulf should gradually offset crude oil inventory builds in the Mid Cont & narrow the WTI-Brent spread; 2) we expect unutilized capacity to be lured into action in response to strong margins, potentially filling product shortfalls; 3) recent rationalization isn’t enough: 2.6MMBbld & 2.1MMBbld are slated to start up in 2012/13; 4) demand for gasoline in the U.S. has been creeping along at lows not seen since 2001."
"Downgrading Buy rated names HolyFrontier (NYSE: HFC) and Valero (NYSE: VLO) to Neutral...We estimate the good news is priced into shares of HFC and VLO. We view the risk reward profile at current price levels as less attractive and are downgrading shares to Neutral from Buy. We’ve retained Neutral ratings on Tesoro (NYSE: TSO) and Western Refining (NYSE: WNR)."
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