MPC, ANDV, VLO, PSX: Refining Stocks’ 3Q17 Performance
Refining stocks’ performance
The SPDR S&P 500 ETF (SPY), the broader market indicator, rose 3.9% in 3Q17, meaning that refining stocks outperformed SPY. Let’s look at what led to a rise in refining stocks in the quarter.
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In 3Q17, refining stocks likely rose because of abrupt expansion of refining cracks due to Hurricane Harvey. The hurricane, which hit Texas on August 26, 2017, impacted around 30% of US refining capacity, including Valero’s (VLO) five refineries on the US Gulf Coast. These refineries have a combined capacity of 1.4 million barrels per day, representing 44% of VLO’s total throughput capacity. The hurricane also affected Marathon Petroleum’s (MPC) Texas City and Galveston Bay refineries, and Phillips 66’s (PSX) Sweeny, Texas, refinery, which has a capacity of 247,000 barrels per day. However, US Mid-West refiners such as Andeavor (ANDV) witnessed negligible operation interruption, resulting in these companies enjoying wider cracks.
Also, the EIA (U.S. Energy Information Administration) posted a huge fall in gasoline inventories in the week ended September 8, 2017, the largest weekly drop in gasoline inventories in 27 years. Distillate inventories also fell, impacted by Hurricane Harvey.
Therefore, Harvey affected refining cracks considerably, boosting refining stocks. Refiners delayed their scheduled maintenance activities to take advantage of the stronger cracks. For instance, MPC postponed planned maintenance at its Catlettsburg, Kentucky, refinery for a week.
Overall, refining stocks rose in 3Q17. This rise was likely due to Hurricane Harvey, which resulted in higher regional refining indicators. A fall in gasoline and distillate inventories also supported the rise.