Analyst Sees Oil Refiners Beating Short-Term Supply Crunch

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U.S. oil refiners can beat a short-term supply crunch by boosting the use of OPEC oil and diverting exports headed for Canada, an analyst said. As a result, Cowen's Sam Margolin predicted that independent refiners will maintain positive free cash flows until the seasonally stronger fourth-quarter revives earnings. Refiners are getting squeezed by a drop-off in domestic supplies as drillers pull back according to Margolis, who noted a narrowing spread between the more costly Brent crude oil and cheaper West Texas Intermediary supplies. But Margolis sees the crunch as temporary and expects supplies of West Texas crude to rebound in response to demand during the second half. Margolis maintained an Outperform rating on a half-dozen mostly Texas-based independent oil refiners. Those include Valero Energy Corporation
VLO
, Marathon Petroleum Corp
MPC
, Tesoro Corporation
TSO
, Western Refining, Inc.
PBF
. Margolis predicts that second-quarter earnings will come in above the Wall Street consensus for Valero, Tesoro, and Western Refining. But Margolis expects below-consensus earnings from both Marathon and PBF in the second quarter. Yet he said all six companies on the Outperform list will beat Street views for full-year results. Margolis maintained Market Perform ratings on HollyFrontier Corp
HFC
, Alon USA Energy, Inc
ALJ
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, Calumet Specialty Products Partners, L.P
CLMT
, and Northern Tier Energy LP
NTI
.
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Posted In: Analyst ColorReiterationAnalyst Ratings
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