Tesoro’s refining margin trend
Before analyzing Tesoro’s (TSO) refining index for 3Q16, let’s take a look at TSO’s refining margin trend until 2Q16.
Tesoro (TSO) noted a fall in its GRM (gross refining margin) by $3.40 per barrel YoY (year-over-year) to $15.70 per barrel in 2Q16. Its operating costs fell by $0.60 per barrel YoY to $5.00 per barrel in 2Q16. The fall in its gross margin was partially offset by a decline in operating cost.
TSO’s peers also noted a decline in their refining margins in 2Q16 YoY. Marathon Petroleum (MPC) recorded a fall in the gross refining and marketing margin by $2.00 per barrel over 2Q15 to $12.80 per barrel in 2Q16. In 2Q16, Valero Energy (VLO) noted a fall in its gross refining margin to $8.90 per barrel compared to $13.70 per barrel in 2Q15.
For broad-based exposure to energy sector stocks, you can consider the Energy Select Sector SPDR ETF (XLE). Also, for a cross-sectional study on leading refining stocks, you can read What You Learn When You Compare Refiners MPC, TSO, VLO, and PSX.
Tesoro’s refining index
In 3Q16, Tesoro’s (TSO) refining index values, which are regional crack indicators in the areas where TSO operates, have fallen compared to 3Q15. The index value in California stands at $12.00 per barrel in 3Q16 compared to $24.00 per barrel in 3Q15.
Similarly, the Pacific Northwest and Midcontinent index values stood at $11.00 per barrel and $14.70 per barrel in 3Q16 compared to $17.50 per barrel and $24.80 per barrel in 3Q15, respectively. This points toward the likely fall in Tesoro’s GRM in 3Q16 compared to 3Q15.
But, quarter-over-quarter, the index values have put up a mixed performance. The index value in California fell, but the other two zones rose quarter-over-quarter. On a consolidated basis, TSO’s index value stood at $12.50 per barrel in 3Q16 compared to $13.90 per barrel in 2Q16, implying likely weakness even on a quarterly basis.