Deutsche Bank Cuts Targets 7% On Raft Of Oil Stocks

The end of a 12-year bullish oil cycle shifts investment focus in the refining sector from fast growth to strong balance sheets and high-quality, diversified assets, an analyst said Thursday.

Deutsche Bank's Ryan Todd cut his price targets an average of 7 percent on a raft of players in the oil sector Thursday, citing lower energy prices and weaker earnings.

But Todd upgraded Phillips 66 PSX to Buy from Hold although shaving its target to $92, from $101. The analyst also downgraded Valero Energy Corporation VLO to Hold, from Buy, cutting his target on the stock to $59, from $63.

Todd maintained Buy ratings on Chevron Corporation CVX, Hess Corp. HES, Tesoro Corporation TSO and Marathon Petroleum Corporation MPC.

The underlying problem is an imbalance in supply and demand for oil, which Todd believes will to continue into 2017.

Between 2000 and 2012, global demand grew at more than 1 million barrels a day, while non-OPEC supply grew at just 560 barrels a day, according to Todd.

But beginning in 2013, daily non-OPEC supply has grown at 1.6 million barrels, led by so-called unconventional U.S. supply growth and increasing production in Brazil, Todd said. At the same time, global daily demand growth fell below 1 million barrels.

"This isn't just a 2014 or even a 2015 issue, but could easily last into the 2016-2017 time period, or beyond," Todd said.