I hate to RAIN on anyone's "parade", but strong refining margins in Q1 of this year is OLD NEWS. These strong margins are easily tracked at the Dept. of Energy website and have been going on for months. http://www.eia.doe.gov/oil_gas/petroleum/info_glance/petroleum.html Those of you who live in California have watched gas prices for Regular go from $2.50 to $3.00 in the last six weeks. Much of this has to do with a tighter market from maintenance shut-downs in the switch from the Winter blend of gasoline to the lower volatility Summer blend of gasoline. This always occurs in the time frame of Feb/March here in California. Hence, the move in VLO from $48 to $60. I'm not saying that the refining stocks can't go higher. I'm just saying that the trend in these names is fairly mature. Be careful.
No rain, the refining margins aren't so much old news as they are expected news. The crack spread futures for March, April and May are in the $10 range and fall below that starting in June, which is when the integrateds should start coming on stronger. Look at the huge drop in crack spread futures from August to September and make sure you exit the oil patch long side sometime in August, Labor day signals the end of driving season. Figure a top in refiners in May and act accordingly. Jmho, ymmv.
That's a great link. I could've sworn I was reading average margins per barrel of $17, but maybe that was just summer blend or for sour crude. I'm wondering under what scenario refining capacity rises above 90% or 94%.
I saw the same article BuyLo. http://www.oilintel.com/spothome.cfm?loc_id=7 Looks very very strong this morning. I'll probably make a good 25% on those options today...will probably scale out. Can't knock profits like that. Cheers.
Nope, you weren't wrong about the $17 per barrel figure. But those figures in that weblink have nothing to do with the refining margins on the WEST COAST which is where VALERO does most of its business. On the West Coast, refiners are currently looking at a $39 per barrel margin because they have cranked out 7.8% less gasoline since the start of February vs the same period last year. http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/03/09/MNGF9OID9N1.DTL :eek:
Very cool article. I think Valero bases here and moves higher still. The chart is stellar, volume is grand, and accumulation seems to be heavily under way. Might dip slightly, but a push upward seems in the cards at this point. That article foreshadows how high earnings on VLO could be above estimates.
Thanks. I need to be more thorough. I'm glad I am holding a large position in Valero right now, but in the future, it's going to be a strategy based on specific and accurate info, which is what I thought (wrongly) I was acting on. I am thinking of adding to my already large position in VLO. I am not too bullish on equities right now, but these refinery issues are bound to boost margins and profits at the refiners.
I quoted the Argus crack spread earlier, here is the futures chain for the Nymex rbob gasoline crack spread. Still, the important thing to notice is the steady drop off in each succesive month. http://finance.yahoo.com/q/fc?s=RXJ07.NYM