How Is Tesoro Stock Performing Pre-4Q16 Earnings?



Tesoro’s stock performance

Refining sector stocks usually perform in line with refining margins and cracks. Since February 2016, refining stocks have been having volatile performances on the back of an uncertain crack environment. In 2016, refining cracks rose from February to March. They fell from March to July and then rose again from July to September.

Continuing the uptrend, Tesoro stock rose 10.0% in 4Q16, from October 3, 2016, to December 30, 2016. That happened despite refining index values falling in its operating zone in 4Q16 year-over-year.

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The rise in Tesoro stock is likely due to optimism in the entire energy sector on news of production cuts by OPEC (Organization of the Petroleum Exporting Countries). These cuts were supported by Russia, a non-OPEC country. For more on this, you can read Crude Oil Prices Skyrocket as OPEC Agrees to Cut Production.

In 4Q16, Marathon Petroleum (MPC) and Phillips 66 (PSX) rose 23.0% and 7.0%, respectively. Alon USA Energy (ALJ) had a sharp rise of 39.0%. For exposure to refining sector stocks, you can consider the Vanguard Energy ETF (VDE), which has an ~8.0% exposure to the sector.

TSO stock and its correlation to crude oil and natural gas

Tesoro stock has a positive correlation to crude oil prices. TSO’s correlation coefficient compared to WTI (West Texas Intermediate) for a 12-month period is 0.25. That means that on average, 25.0% of the movement in Tesoro stock can be explained by changes in WTI prices.

Overall, since January 28, 2015, Tesoro stock has risen 2.0%. By comparison, crude oil and natural gas prices have risen 20.0% and 17.0%, respectively, in the same period. The correlation of Tesoro stock to natural gas is feeble at 0.07.


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