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What’s behind the Volatility in Tesoro’s Stock Performance?

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Refining stocks performance so far

Refining stocks such as Tesoro (TSO) have been putting up volatile performances due to unstable refining margins. This behavior is in stark contrast to 2015, when refining stocks were on an upward trend due to the US refining industry’s reaping the benefit of strong refining margins.

However, in December 2015, refining stocks fell on the news of the abolition of the crude oil export ban in the United States.

Refining stocks’ downward journey came to a halt in February 2016. Since then, refining stocks have had a roller-coaster performance. From February’s end to April’s end in 2016, refining cracks strengthened. Major refining companies’ refining margin indicators also showed improvements. 

However, from April’s end to June’s end, cracks showed a mixed trend, with some areas witnessing weakness and some remaining flat. This again put pressure on refining stocks.

Since June’s end, refining stocks have risen in anticipation of a better refining margin environment. This rise was on account of higher expected demand during the summer season and heavy maintenance activity in the US Gulf Coast.

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Tesoro’s stock performance and moving averages

TSO’s roller-coaster ride also started in February 2016. In February, Tesoro’s stock was trading below its 200-day and its 50-day moving averages. On one hand, from February’s end to April’s end, TSO rose 12%, but on the other hand, from April’s end to June’s end, TSO fell 17%. During this period, Tesoro’s stock remained below its 200-day moving average and continued to hover around its 50-day moving average.

Finally, since June’s end, Tesoro’s stock has risen 6%, trending in line with its peers. During the same period, Valero Energy (VLO) and HollyFrontier (HFC) rose 8% each. Delek US Holdings (DK) rose even more sharply by 45%. For exposure to refining sector stocks, you can consider the iShares US Oil & Gas Exploration & Production ETF (IEO). The ETF has ~21% exposure to the sector.

Currently, TSO is trading below its 200-day moving average and marginally above its 50-day moving average.

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