Refiners have been beaten up and declining since late February, but the downtrend has shown signs of a pause in recent weeks. The sector has been pressured by a meaningful drop in crack spreads (profit margins) in part linked to a narrowing of the Brent/WTI spread. The supply/demand conditions in the oil market seemed to tighten as highlighted by a sharp drop in U.S. inventories and pick up in refinery activity.
The crack spread or margins are a key price driver:
Refiners have differing input costs depending on their ability to
source and crack differing grades of crude oil. As the graphic displays,
the stock price of refiners tends to follow the direction of crack
spreads or their margins. The 3:2:1 crack is overlaid against the
average price of Valero (VLO - Analyst Report), Western Refining (WNR - Analyst Report), and Tesoro (TSO - Analyst Report).
The 3:2:1 crack calculates the profits of converting three barrels of
crude oil into two barrels of gasoline and one barrel of heating oil.
The graphic displays a generic view of margins using WTI crude oil for
an input. In reality, refiner profits are subject to the differing
pricing of inputs. There are light and heavy crude mixes and different
prices among light and heavy crudes. The Brent/WTI spread is an
example of differing prices for light crude oil. These differentials can
impact profitability. (more)
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goldnews.bullionvault.com / August 16, 2013
Everyone’s so bearish on gold prices, could they fall any further…?
The “ULTIMATE LOW” in gold prices was three weeks ago, writes Brett Eversole at Steve Sjuggerud’s True Wealth service.
That’s what Dennis Gartman told CNBC’s Squawk Box last month.
Gartman knows commodity trading. He’s written The Gartman Letter, every day, for 26 years. It’s a must-read around the DailyWealth office.
Today, Gartman is buying gold. He plans to keep buying. And I think he’s right. Let me explain…
Gartman is bullish for a simple reason…one that longtime DailyWealth readers will understand.
The investing community hates gold right now.
“I bought it for the simple reason that every media outlet, every newspaper article, everything that you listen to was overtly, manifestly, ridiculously bearish,” Gartman explained.