Fitch Ratings published a short report on the effect of the compression in crude oil spreads on refiners. We looked at this phenomenon about a month ago. Fitch concludes that the “relative cost advantage of higher complexity refiners”, that is, those that process heavy, sour crudes, “has been muted relative to less flexible sweet light peers.” If the heavy sour crudes are not discounted relative to light, sweet WTI, refiners such as Valero Energy Corp. (NYSE:VLO), Frontier Oil Corporation (NYSE:FTO), and Tesoro Corporation (NYSE:TSO) face a period of “underperformance.”
According to Fitch, “Despite the near-term decline in crude oil spreads, Fitch views heavy and sour conversion capacity as a key long-term competitive advantage in the refining sector.”
Valero is trading up more than 3% in the pre-open market, and Tesoro is up more than 10%. Frontier, which was downgraded from ‘Buy’ to ‘Hold’ by Argus on Friday, has seen no action yet this morning.
Paul Ausick
March 23, 2009
Are You Ahead, or Behind on Retirement? (sponsor)
If you’re one of the over 4 Million Americans set to retire this year, you may want to pay attention.
Finding a financial advisor who puts your interest first can be the difference between a rich retirement and barely getting by, and today it’s easier than ever. SmartAsset’s free tool matches you with up to three fiduciary financial advisors that serve your area in minutes. Each advisor has been carefully vetted, and must act in your best interests. Start your search now.
Don’t waste another minute; get started right here and help your retirement dreams become a retirement reality.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.