Refining companies Delek US (DK) and Alon USA Energy (ALJ) are trading 11% and 13%, respectively, below their 100-day moving averages. Delek has been in a continuous downtrend since July after it closed near its 2015 highs. The stock formed a double top pattern in July. It fell since then. For the last five months, the stock struggled to cross its 100-day moving average. On the other hand, Alon has been moving in a narrow range of $16 to $18 since October. After the Fed’s decision, Alon is trading below $16 as of December 29. HollyFrontier (HFC) is also trading below its 100-day moving average.
Phillips 66 (PSX) and Tesoro (TSO) are trading 0.8% and 0.9% below their 100-day moving averages, respectively. Also, Valero Energy (VLO) and Marathon Petroleum (MPC) are trading 8% and 2%, respectively, above their 100-day moving averages. In addition, the energy sector benchmark, the Energy Select Sector SPDR Fund (XLE), is trading 7.7% below its 100-day moving average. The above chart shows the moving averages and forward target prices of theses downstream companies.
Analysts’ estimates suggest that the ten large-cap refiners may return 24% on average in the next 12 months. Frontline refineries Phillips 66, Valero Energy, Marathon Petroleum, and Tesoro could rise by 18%, 12%, 31%, and 20%, respectively, from their current levels.
Also, Delek, Alon, and CVR Refining could rise by 48%, 29%, and 10%, respectively, from current levels. In terms of the current and forward PE (price-to-earnings) ratio, Delek, CVR Refining, and HollyFrontier are relatively cheaper than other downstream companies.
In the next part, we will analyze the cyclicality of the crack spread.