Why Short Interest in Valero Has Risen in 1Q18

In the prior article, we looked at the institutional holdings in Valero Energy (VLO). In this part, we’ll examine the changes in its short interest.

Valero Energy (VLO) has seen a rise in its short interest as a percentage of outstanding shares from 3.4% on January 2, 2018, to its current level of 3.7%. This typically implies that the bearish sentiment in a stock has increased. However, during the same period, Valero stock rose 0.5%.

Valero (CLO) saw a rise in bearish sentiment, which was likely due to weakening refining environment in 1Q18. Gasoline and distillate inventories have risen during the quarter, which we discussed in Part 1 of this series.

Valero’s refining margin indicators declined in 1Q18 over 4Q17. Three of the company’s four regions have seen a decline in average regional cracks in 1Q18 compared to 4Q17. 

VLO’s Midcon crack indicator fell from $16.50 per barrel in 4Q17 to $14.50 per barrel in 1Q18. Its USWC and North Atlantic indicators fell by $0.60 per barrel quarter-over-quarter and $1.40 per barrel quarter-over-quarter, respectively, in 1Q18. 

However, the USGC crack rose by $0.10 per barrel over 4Q17 to $16.60 per barrel in 1Q18. The fall in three of the four zones points toward the likely decline in VLO’s refining margins in 1Q18 over 4Q17.

Delek US Holdings (DK) has also seen a rise in its short interest by 0.4% since January 2, 2018. Also, short interest in Phillips 66 (PSX) rose 0.3% in the same period. 

However, short interest in HollyFrontier (HFC) and PBF Energy (PBF) fell 0.6% and 1.2%, respectively. Currently, DK, PSX, HFC, and PBF have short interest readings of 8.7%, 1.5%, 4.9%, and 7.8%, respectively.

Since January 2, 2018, HFC and PBF saw their stock prices fall 12.2% and 13.4%, respectively. DK and PSX stock fell 5.0% and 9.1%, respectively, in the same period.