The weekly supply data is out from the Department of Energy and the refining capacity data continues to be a standout from last week.  The recent rise in oil prices may act as a curb to the benefits of refinery stocks.  Normally, the key ETFs of Oil Services HOLDRs (NYSE: OIH) and the United States Oil (NYSE: USO) ETF are the ones to watch.  With a continued refinery watch, the stocks of Valero Energy Corp. (NYSE: VLO), Sunoco Inc. (NYSE: SUN), and Hess Corporation (NYSE: HES) may be more pertinent.  Surprisingly, there is not the expected move seen so far.

It seems that the poor weeks of being under 80% capacity are behind us.  Refining capacity was 82.6% versus last week’s 81.1%, and that is a continued trend higher.  Dow Jones had noted analysts expected only 81.3% and were told that anything close to last week’s figures might still be good enough.

Crude oil saw a build of 2.929 million barrels to 3554.189 million barrels; Dow Jones had expected a build of 2.1 million barrels and we had no indications of anything unique or different to expect on the crude front.

Gasoline rose by 313,000 barrels after a drop a week ago; Dow Jones had estimates looking for a drop of 1.3 million barrels and we had been told that anything inside of 1 million barrels would be a price-pressure mechanism to the downside.

The Oil Services HOLDRs (NYSE: OIH) is up 1.4% at $122.27 and United States Oil (NYSE: USO) is up 1.1% at $40.41.

Valero Energy Corp. (NYSE: VLO) is down 0.76% at $19.69, which is worse than right before the news about refineries running at a higher rate.  Sunoco Inc. (NYSE: SUN) is up 0.24% at $29.10 and Hess Corporation (NYSE: HES) is up 1% at $62.73.

Valero’s lack of upside may be on reports of its Corpus Christi having unplanned maintenance at Complex 1 located at the West Plant on March 28 to 30.

Refining capacity run rates being higher is of course no assurance that they are running at any better profitability rate.  Still, ramping capacity doesn’t seem likely if it only generates more losses.  Maybe US refineries are starting to get some pricing power after all as the economy continues to recover.

JON C. OGG

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