Energy stocks traded lower on Tuesday, but one Wall Street firm says now is the perfect time to pull the trigger on a handful of oil refiners.

The Analyst: Morgan Stanley analyst Connor Lynagh initiated coverage of the following stocks:

• HollyFrontier Corp (NYSE:HFC) initiated at Overweight with a $40 price target.
• Marathon Petroleum Corp (NYSE:MPC) initiated at Overweight with a $75 price target.
• Valero Energy Corporation (NYSE:VLO) initiated at Overweight with an $80 price target.
• Phillips 66 (NYSE:PSX) initiated at Equal Weight with an $80 price target.
• PBF Energy Inc (NYSE:PBF) initiated at Equal Weight with a $12 price target.
• Delek US Holdings Inc (NYSE:DK) initiated at Underweight with a $20 price target.
• Related Link: 3 Oil Services Stocks With The Most Exposure To Hydrogen Production

The Thesis: Lynagh believes it's an attractive time to invest in the refining industry.

“The core of our thesis revolves around a recovery in air travel and jet fuel demand that will drive higher asset utilization and better product pricing,” Lynagh wrote in a note.

He said there's likely between 5% and 10% upside to consensus analyst EBITDA estimates for the Refining & Marketing group in 2022.

Lynagh urged investors to keep things simple when it comes to analyzing refiners in the current climate. Refining is one of the few industries that hasn’t recovered from the 2020 pandemic, and Lynagh said lagging demand for jet fuel is the primary reason why.

Valero and Marathon are two of his top stock picks due to their potential earnings upside, their exposure to renewables and their capital deployment flexibility. Lynagh also likes HollyFrontier because he believes consensus analyst expectations for the stock are too bearish.

Benzinga’s Take: If Morgan Stanley believes the fate of oil refiners is tied closely to jet fuel demand, that means the bull case for refiner stocks in the near term is all about vaccination rates and the spread of the delta variant of COVID-19. Until travelers and businesses feel safe boarding planes once again, jet fuel demand will likely continue to remain well below historical levels.