Valero Stock Outperforms SPY: Is It the Impact of Hurricane Harvey?



Valero’s stock performance

Since July 3, 2017, the start of 3Q17, Valero Energy’s (VLO) stock has risen 5.4%, outperforming the SPDR S&P 500 ETF (SPY), the overall market indicator. The ETF has risen 3.1% in the same period. 

VLO’s peer Andeavor (ANDV) has risen 9.4% since July 3. Also, Phillips 66 (PSX) and Marathon Petroleum (MPC) have risen 6.0% and 1.2%, respectively, in the quarter so far.

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Valero stock rises in 3Q17

In 3Q17, Valero stock has risen, which was likely due to Hurricane Harvey, which hit Texas on August 26, 2017. Harvey impacted around 30% of refining capacity in the US. The hurricane also impacted Valero’s five refineries in the US Gulf Coast region. 

According to media reports, Valero’s Port Arthur, Corpus Christi, and Three Rivers refineries were shut down due to the hurricane. Valero’s Houston and Texas City refineries were not shut down, but operated at reduced levels. The five refineries have a combined capacity of 1.4 million barrels per day, representing 44% of VLO’s total throughput capacity. Now, the refineries are in the process of starting up with few already operating at pre-hurricane levels.

In 3Q17 so far, Valero’s refining margin indicators have risen across the regions quarter-over-quarter as well as year-over-year. Plus, the EIA [1. U.S. Energy Information Administration] reported a fall of 8.4 million barrels in gasoline inventories for the week ended September 8, 2017. This was the biggest weekly fall in gasoline inventories in the past 27 years. Plus, distillate inventories also decreased in the same period. The steeper decline in the inventory captures the impact of Hurricane Harvey.

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Harvey wrought a considerable amount of havoc, impacting refining cracks. Refiners have postponed their scheduled maintenance activities to take advantage of the stronger cracks. For instance, MPC delayed planned maintenance at its Catlettsburg, Kentucky, refinery for a week. Hurricane Harvey is one of the primary reasons leading to a rise in refining stocks.

VLO’s 2Q17 earnings surpassed analysts’ estimates. For more on this topic, please read Valero’s 2Q17 Earnings Beat Estimates, RIN Costs Rise.

In short…

Overall, Valero’s stock increase in 3Q17 quarter-to-date is likely due to the impact of Hurricane Harvey, which caused higher regional refining indicators. Also, a slump in gasoline and distillate inventories in the market and Valero’s improved 2Q17 numbers aided the rise.


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