Oil & Gas Refining & Marketing
Refiners Are Headed Downstream…
Highlights Portfolio Strategy Overbought technicals, pricey valuations, decelerating global growth, declining capex, rising indebtedness and softening operating metrics argue for hopping off the S&P railroads index. Rising refined product stocks, ebbing gasoline demand, and excessive…
Refiners have taken it to the chin over the past six weeks, underperforming both the SPX and the broad energy complex, and deteriorating industry fundamentals signal that more pain lies ahead. Crack spreads have given way recently, and as the Brent/WTI crude oil spread closes in on the zero…
Highlights Portfolio Strategy Firming crude oil prices and recovering capex budgets suggest that energy E&P stocks are in a sweet spot and primed for outperformance. Decreasing refining margins, a deteriorating supply/demand backdrop and extended relative valuations suggest that refiners…
In early September, we opportunistically upgraded the niche S&P oil & gas refining & marketing index to capture the earnings upside from hurricane-related capacity constraints. Such constraints have since normalized and, with some clouds on the horizon, last week we reversed our…
Highlights Portfolio Strategy Recovering energy related capex and upbeat oil prices are a powerful tonic for the S&P integrated oil & gas index. Augment positions to overweight. A diverging crude/refined product inventory backdrop, narrowing Brent-WTI crude oil spread, and extreme…
Highlights Portfolio Strategy Rising oil prices, a weakened U.S. dollar, ongoing global oil producer discipline and still compelling valuations argue for maintaining an above benchmark allocation in the S&P energy index. Wide crack spreads, sticky price hikes and sustained inventory…
Overweight We lifted refiners to overweight in mid-September as the pricing environment looked set to improve dramatically, driven by Hurricane Harvey-related refinery shutdowns and the resulting inventory drawdowns, boosted by an accelerating Brent/WTI spread. This view has largely played out…
Overweight In early July, we lifted refiners to neutral but refrained from turning outright bullish for three reasons: all-time high refining production, high refined product stocks and breakneck pace refinery runs were offsetting the nascent recovery in gasoline consumption, rising crack…
Highlights Portfolio Strategy A supply/demand imbalance has created a playable opportunity in the niche refining energy sub-index. Increase exposure to overweight. Safe haven demand is supporting gold mining equities, but shifting macro forces suggest that it will soon be time to move to the…