How Has Short Interest in Refining Stocks Trended?



Short interest in refining stocks

The short interest (percentage of outstanding shares) in Marathon Petroleum (MPC), Valero Energy (VLO), and Phillips 66 (PSX) has demonstrated a mixed trend since July 2. While short interest in VLO and PSX fell, it rose in MPC.

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Short interest in MPC rose

Short interest in MPC rose by 2.04 percentage points from July 2 to the latest level of 7.45%. During this period, Marathon Petroleum stock rose 13.8%. Usually, a rise in short interest means an increase in the bearish sentiment for a stock.

The increase in short interest in MPC in the third quarter could be due to the then-ongoing process of the Andeavor acquisition. The market’s initial reaction to the acquisition news wasn’t favorable. For more on the market’s reaction, please refer to How MPC and ANDV Stock Have Reacted to Merger Announcement?

On October 1, MPC closed the acquisition of ANDV. This has created a robust downstream company spanning the United States that’s capable of generating massive synergies. Market sentiment could turn favorable as the merged entity’s earnings and cash flows rise, which could lead to a decline in short interest in MPC.

Short interest in VLO and PSX fell

Short interest in VLO and PSX fell by 0.54 percentage points and 0.06 percentage points, respectively, from July 2 to the latest levels of 1.78% and 1.17%. VLO and PSX’s stock prices rose 4.1% and 1.9%, respectively, in the same period.

The rise in positive sentiment for VLO and PSX could be due to better-than-expected second-quarter earnings and lower RINs (renewable identification numbers) prices. The decline in these RINs expenses could provide enormous savings for refiners in their upcoming third-quarter earnings.

In the final part of this series, we’ll review the forward valuations of the refiners covered in this series.


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