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3 Oil Refining Stocks That Just Moved Into Record Territory
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Of late, the refining companies have been dominating headlines in the Oil/Energy space. On Friday, the stock prices of Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) and Phillips 66 (PSX - Free Report) climbed to their all-time highs of $166.10, $195.12 and $159.74, respectively. On the day, each of them saw their share price increase about 3%. This jump marks a year-to-date ascent of somewhere between 20% and 30% for the operators.
Reasons Behind the Rally
Obviously, the recent rise in oil prices has played a key role in the abovementioned companies' surge. That's a big boon for VLO, MPC and PSX, given that it drives prices at the pumps.
During the past week, crude oil surged to its highest levels in four months, surpassing $81 per barrel. This upward momentum was driven by significant decreases in U.S. crude and gasoline inventories, along with an optimistic demand projection from the International Energy Agency (“IEA”). Additionally, ongoing production cuts by OPEC and its allies, coupled with drone attacks on Russian energy facilities in Ukraine, bolstered crude prices.
The IEA revised its forecast for oil demand growth upward for the current year and predicted a slight supply deficit through 2024, contrary to earlier expectations of a surplus. In its monthly report, the IEA raised its estimate for crude oil demand growth in 2024 by 110,000 barrels per day (bbl/day) to 1.3 million bbl/day, citing a stronger outlook for the U.S. market and increased fuel demand in shipping due to longer routes taken to avoid Red Sea conflicts. The agency also lowered its supply forecast for non-OPEC countries.
Escalating attacks on Russian energy infrastructure and persistent uncertainty surrounding the Israel-Palestine conflict were additional factors contributing to the uptick in oil prices. Furthermore, a positive development was the Energy Information Administration's (‘EIA’) report, which revealed the first decline in U.S. crude inventories in seven weeks, accompanied by a significant drop in gasoline inventories. Prior to this, oil prices had been rising following Saudi Arabia's agreement with OPEC+ partners earlier in the month to extend production cuts of around 2 million bbl/day until mid-year.
The downstream operators also benefited from the surge in gasoline prices, as U.S. refiners completed planned maintenance activities. As a result, domestic refinery utilization rates remained below 87% for eight consecutive weeks, marking the longest period of such low utilization in three years.
Strong Q4 Results & a Booming Industry
Continuing the ascension of of Valero Energy, Marathon Petroleum and Phillips 66 shares were their favorable fourth-quarter results that widely surpassed the bottom-line expectations during the period.
VLO’s Q4 earnings of $3.55 per share breezed past the Zacks Consensus of $2.95 a share by 20%. Similarly, MPC easily surpassed Q4 earnings expectations with EPS at $3.98 per share and 69% above estimates of $2.36 a share. Meanwhile, quarterly EPS of $3.09 topped estimates by 30%.
VLO, MPC and PSX stocks are part of the Zacks Oil and Gas - Refining & Marketing industry group, which ranks in the top 30% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market over the last three years.
Image Source: Zacks Investment Research
Final Words
By all accounts, the refining and marketing companies appear to be favorably positioned in the near future. The overall macro environment remains constructive, with steady demand for its products and enough cash flow visibility. At the same time, inflationary concerns have started to resurface and some of these companies could still experience stalling growth associated with broader economic headwinds. Therefore, it would be prudent to wait for a better entry point as the timing is still not right for investors to hit the Buy button. Valero Energy, Marathon Petroleum and Phillips 66 currently carry a Zacks Rank #3 (Hold) each.
Image: Bigstock
3 Oil Refining Stocks That Just Moved Into Record Territory
Of late, the refining companies have been dominating headlines in the Oil/Energy space. On Friday, the stock prices of Valero Energy (VLO - Free Report) , Marathon Petroleum (MPC - Free Report) and Phillips 66 (PSX - Free Report) climbed to their all-time highs of $166.10, $195.12 and $159.74, respectively. On the day, each of them saw their share price increase about 3%. This jump marks a year-to-date ascent of somewhere between 20% and 30% for the operators.
Reasons Behind the Rally
Obviously, the recent rise in oil prices has played a key role in the abovementioned companies' surge. That's a big boon for VLO, MPC and PSX, given that it drives prices at the pumps.
During the past week, crude oil surged to its highest levels in four months, surpassing $81 per barrel. This upward momentum was driven by significant decreases in U.S. crude and gasoline inventories, along with an optimistic demand projection from the International Energy Agency (“IEA”). Additionally, ongoing production cuts by OPEC and its allies, coupled with drone attacks on Russian energy facilities in Ukraine, bolstered crude prices.
The IEA revised its forecast for oil demand growth upward for the current year and predicted a slight supply deficit through 2024, contrary to earlier expectations of a surplus. In its monthly report, the IEA raised its estimate for crude oil demand growth in 2024 by 110,000 barrels per day (bbl/day) to 1.3 million bbl/day, citing a stronger outlook for the U.S. market and increased fuel demand in shipping due to longer routes taken to avoid Red Sea conflicts. The agency also lowered its supply forecast for non-OPEC countries.
Escalating attacks on Russian energy infrastructure and persistent uncertainty surrounding the Israel-Palestine conflict were additional factors contributing to the uptick in oil prices. Furthermore, a positive development was the Energy Information Administration's (‘EIA’) report, which revealed the first decline in U.S. crude inventories in seven weeks, accompanied by a significant drop in gasoline inventories. Prior to this, oil prices had been rising following Saudi Arabia's agreement with OPEC+ partners earlier in the month to extend production cuts of around 2 million bbl/day until mid-year.
The downstream operators also benefited from the surge in gasoline prices, as U.S. refiners completed planned maintenance activities. As a result, domestic refinery utilization rates remained below 87% for eight consecutive weeks, marking the longest period of such low utilization in three years.
Strong Q4 Results & a Booming Industry
Continuing the ascension of of Valero Energy, Marathon Petroleum and Phillips 66 shares were their favorable fourth-quarter results that widely surpassed the bottom-line expectations during the period.
VLO’s Q4 earnings of $3.55 per share breezed past the Zacks Consensus of $2.95 a share by 20%. Similarly, MPC easily surpassed Q4 earnings expectations with EPS at $3.98 per share and 69% above estimates of $2.36 a share. Meanwhile, quarterly EPS of $3.09 topped estimates by 30%.
VLO, MPC and PSX stocks are part of the Zacks Oil and Gas - Refining & Marketing industry group, which ranks in the top 30% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market over the last three years.
Image Source: Zacks Investment Research
Final Words
By all accounts, the refining and marketing companies appear to be favorably positioned in the near future. The overall macro environment remains constructive, with steady demand for its products and enough cash flow visibility. At the same time, inflationary concerns have started to resurface and some of these companies could still experience stalling growth associated with broader economic headwinds. Therefore, it would be prudent to wait for a better entry point as the timing is still not right for investors to hit the Buy button. Valero Energy, Marathon Petroleum and Phillips 66 currently carry a Zacks Rank #3 (Hold) each.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.