Market Overview

Citi Downgrades Refiners: What You Should Know

Share:
Citi Downgrades Refiners: What You Should Know

  • Citi has downgraded a handful of U.S. refiner stocks based on shrinking differentials and falling production.
  • The firm maintains Buy ratings on several names in the space.
  • Citi predicts a $4.50/bbl WTI/Brent differential in 2016.
  • Earnings season for U.S. refiners is kicking off soon, and Citi Research analyst Faisel Khan recently previewed refiner earnings and downgraded several names in the space. Citi believes that narrowing differentials will continue to weigh on refiner margins in the near future.

    The Numbers

    Narrowing differentials have come as a result of the recent pipeline expansions and production slowdowns in the United States. Citi predicts that this environment will not change anytime soon.

    The firm’s latest forecast calls for Brent-WTI differential of only $4.50/bbl, much lower than the previous forecast of $8/bbl. Citi is now calling for parity among LLS, ANS and Brent.

    “On the flipside, we are increasing our gasoline margin assumptions by $2 per barrel and keep our distillate margins unchanged,” Khan added.

    Related Link: Energy Excellence: It Could Be The Refiners ETF

    M&A

    Citi generally believes that independent refiners are quicker to pull the trigger on buying opportunities than major oil companies. The firm is positive on PBF Energy Inc (NYSE: PBF)’s acquisitions of the Torrance and Chalmette refineries.

    Outlook

    In the report, Citi downgraded the following refiners from Buy to Neutral:

    • HollyFrontier Corp (NYSE: HFC)
    • Western Refining, Inc. (NYSE: WNR)
    • CVR Refining LP (NYSE: CVRR)
    • Alon USA Partners LP (NYSE: ALDW)
    • Northern Tier Energy LP (NYSE: NTI)

    The firm maintains its Buy rating on these names:

    • Phillips 66 (NYSE: PSX) (price target $88)
    • Marathon Petroleum Corp (NYSE: MPC) (price target $70)
    • Valero Energy Corporation (NYSE: VLO) (price target $74)
    • PBF Energy (price target $48)

    Disclosure: The author holds no position in the stocks mentioned.

    Image Credit: Public Domain

    Latest Ratings for PBF

    DateFirmActionFromTo
    Sep 2019MaintainsOutperform
    Sep 2019MaintainsUnderweight
    Aug 2019UpgradesSellNeutral

    View More Analyst Ratings for PBF
    View the Latest Analyst Ratings

    Posted-In: Brent Chalmette Citi ResearchAnalyst Color Downgrades Price Target Top Stories Analyst Ratings Best of Benzinga

     

    Related Articles (ALDW + CVRR)

    View Comments and Join the Discussion!

    Latest Ratings

    StockFirmActionPT
    ELMDDougherty & Co.Initiates Coverage On12.0
    MRNSCantor FitzgeraldAssumes7.0
    MNRLCapital One FinancialInitiates Coverage On23.0
    SONVertical GroupUpgrades
    UNPMorgan StanleyMaintains136.0
    View the Latest Analytics Ratings
    Don't Miss Any Updates!
    News Directly in Your Inbox
    Subscribe to:
    Benzinga Trading Daily
    Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
    Market in 5 Minutes
    Everything you need to know about the market - quick & easy.
    Daily Analyst Rating
    A summary of each day’s top rating changes from sell-side analysts on the street.
    Thank You

    Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

    Benzinga's Volume Movers

    Citron Calls Valeant The 'Pharmaceutical Enron,' Sees 60% Downside In Stock