U.S. Refiners Stocks Have Gone Vertical!

U.S. refining stocks rose more than 70% over the past six months in absolute terms and 45% relative to the market, but the rally is not yet over.

U.S. Refining Stocks

A ccording to our Commodity & Energy Strategy service, the rally in U.S. refinery stocks has further to run. One of the reasons is that distillate crack spreads are extremely wide versus WTI and LLS benchmarks, indicating genuine scarcity of this product. Distillate inventories are at four-year lows and the global growth recovery will likely lead to further distillate shortages.

In addition, the Brent/WTI spread will stay wide. Cushing inventories rose by 3 million barrels over the last month, despite the ongoing increase in petroleum railroad transportation.

This highlights that transportation bottlenecks are worsening and hefty WTI discounts versus Brent are likely to persist. Finally, valuations are still attractive and profits will continue to expand.

Bottom Line: Maintain a long position in U.S. refinery stocks.

Print Friendly
Macroeconomic Research
BCA Research About BCA Research

BCA Research is the world’s leading provider of independent investment research. Since 1949, the firm has supported its clients in making better investment decisions through the delivery of leading-edge economic analysis and comprehensive investment strategy research. With access to over 150,000 raw time-series, BCA strategists are aided by one of the most extensive research databases in existence, cover every region of the globe, and provide analysis on virtually every investable asset class. BCA maintains a head office in Montreal, with local offices in New York, Los Angeles, London, Hong Kong, Sydney, and Buenos Aires. Not yet a client of BCA? Take a short trial to our research.