Returns of refining stocks
In this series, we’ll evaluate the returns of six US refining companies over the past month. Refining stocks have fallen in the period.
Phillips 66 (PSX) stock has fallen the least, by ~8%, since May 3, 2019. Delek US Holdings (DK) has fallen less than 15% in the same period. HollyFrontier (HFC), Valero Energy (VLO), and Marathon Petroleum (MPC) have fallen in the range of 15%–20%, and PBF Energy (PBF) has seen the sharpest fall of ~21% in the past month.
What’s affected refining stocks in the past month?
The sharp fall in refining stocks has been led by weaker equity markets driven by escalating trade tensions. The trade war between the US and China and rising trade worries between the US and Mexico have hit equity markets. Investors are now worried about global economic growth and demand prospects for the year. This worry has also hit oil prices, the barometer of the global energy environment.
Vital oil spreads, which affect refiners’ margins, have fallen YoY (year-over-year) in the second quarter. The Midland spread and the Canadian differential have fallen 69% YoY and 32% YoY, respectively, so far in the quarter.
However, refining crack conditions have been recovering. The US Gulf Coast WTI 3-2-1, the benchmark crack, has increased 11% YoY in the second quarter.
Overall, refining stocks have slumped likely due to lower equity markets and a narrower oil spread, but higher refining cracks have partly limited the fall.
DK’s, VLO’s, and PBF’s ten-day moving averages have broken below their 30-day moving averages. The gaps between PSX’s, HFC’s, and MPC’s ten-day moving averages and 30-day moving averages have also widened. Their ten-day moving averages currently stand far below their 30-day moving averages, indicating short-term technical bearishness.