Refiners next movers?

[john_for_u80]

SUN: Started its uptrend?
http://stockcharts.com/h-sc/ui?s=sun&p=D&b=5&g=0&id=p29735565936

HOC: Forming a base with BB tightening.
http://stockcharts.com/h-sc/ui?s=hoc&p=D&b=5&g=0&id=p29735565936

VLO: Same as HOC
http://stockcharts.com/h-sc/ui?s=vlo&p=D&b=5&g=0&id=p29735565936

[Survivor]

Hope they do. Got some shares I'd like to move.

[Survivor]

*

[mark_brantford]

Looks like it to me, just doubled down on TSO at 16$. Also in CLMT. I see these much like the airlines as a direct inverse oil play.

That's why I love cycles. Oil will (and has already, of course) drop, increasing demand for refined products and lowering input costs. You don't get much more of a sure thing than this, IMHO.

[Supreona]

Looks like it to me, just doubled down on TSO at 16$. Also in CLMT. I see these much like the airlines as a direct inverse oil play.

That's why I love cycles. Oil will (and has already, of course) drop, increasing demand for refined products and lowering input costs. You don't get much more of a sure thing than this, IMHO.

Indeed.

[madcowdisease]

Has there been any dilution in either TSO or VLO? I can remember when both of these were $70 stocks. I think VLO split from close to $200/share but why has it only dropped 50% versus TSO getting shallacked by the street? Is there something deeper other than oil's unwarranted, meteoric rise that has TSO down considerably more than VLO? If not, TSO looks like a great buy at these levels.

[Survivor]

PBR, hit another mother load of sweet crude. They have more oil than Saudi Arabia...

[madcowdisease]

PBR, hit another mother load of sweet crude. They have more oil than Saudi Arabia...

Now, maybe my EWZ will stop falling!

[mark_brantford]

Has there been any dilution in either TSO or VLO? I can remember when both of these were $70 stocks. I think VLO split from close to $200/share but why has it only dropped 50% versus TSO getting shallacked by the street? Is there something deeper other than oil's unwarranted, meteoric rise that has TSO down considerably more than VLO? If not, TSO looks like a great buy at these levels.

I think TSO had some artificial inflation due to a 65$/share offer some time last year by Kirk Kerkorian. Without that I think it would have topped around 50$

[madcowdisease]

So basically these are safe?

[mark_brantford]

So basically these are safe?

Is anything, really? :) IMHO There is very little downside.

[madcowdisease]

Is anything, really? :) IMHO There is very little downside.

What I don't like about them is we are at the tail end of the driving season so demand should start to decline from lower levels of demand already given the higher prices. I'll watch them but not getting in just yet.

[cramerica1972]

What I don't like about them is we are at the tail end of the driving season so demand should start to decline from lower levels of demand already given the higher prices. I'll watch them but not getting in just yet.the best time to buy refiners is in the fall and sell in spring just before summer right?

[MaryKay1965]

the best time to buy refiners is in the fall and sell in spring just before summer right?

I think now is the time to move into the oil refiners. The "crack spread" should make the refiners more profitable now, since the price of crude has decreased. For those who don't know, the "crack spread", in laymans' terms, is simply the potential profit for the oil refiners.

Think of it this way, a barrel of crude can drop 3-4 dollars in a day, but when we fill up at the end of the week, we only see a .02-.04 price difference in the price of a gallon of gas. The oil refiners should be seeing a bigger, faster profit margin since the price of crude seems to be dropping significantly faster than the price of gas is dropping at the pump. Basically, it costs them the same amount of time/labor/machinery use, etc. to produce gallons of gas from a barrel of oil. However, their profit margins comes from their initial price of a barrel of oil. ($145 vs. $115) Remember, crude drops a couple of dollars a day compared to gasoline dropping a couple of cents a week. (Gas prices seem to shoot up like a rocket and drop like a feather.)

Taking a look at VLO, TSO, SUN, FTO, HOC, WNR, etc. and notice how the oil refiners have been making gains the last week or so, since the price of crude has continued to decline. This is just my honest opinion of my decision to go long VLO, for now, and so far it has been the right decision. Although, I will definately be keeping an eye on any oil related stocks as well as tight stops.

[madcowdisease]

the best time to buy refiners is in the fall and sell in spring just before summer right?

I thought it was the other way around. Typically the demand for crude oil is higher when the Northern Hemisphere - where 2/3 of world population resides - is in its cold season due to the need for heating oil. Refined products such as gasoline tends to go down in this period so the crack spread is lower than in summer when the demand for gasoline is highest due to vacation season.

I don't feel confident enough in ths group to buy just yet. If the equity markets break down again we'll see Goldman et al rotate their capital back in to futures and manipulate oil higher until Congress returns from recess and grows a pair to pass the anti-manipulation bill. We've seen $10+ oneday runs in a barrel of crude already this year. Given I hold a 8-5 job I don't have the luxury to sell out of VLO or TSO intaday if Goldman does it again and the nature of CL and RBOB is volatile enough to not be conducive to trailing stops in either position.

[mark_brantford]

I bought some TSO at 28 (oops!) and then doubled up (and more) at 15. So I've been watching them for a while now, and IMHO, 15 was the bottom for TSO. Think about it this way; their asset value is worth more than their combined share value right now. Now this is just TSO in particular, I don't know about VLO. On the other hand, they are really volatile right now, so you can probably get in a bit lower than the current price, but I think it bounces around down here for a while then up from there.

I think the US economy was the first to crack, but will also be the first to recover. Europe and asia are just starting to feel the sting of inflation and economic weakness, which will put further downward pressures on oil overall, benefiting US refiners.

[john_for_u80]

Keep refiners on the radar. Today's action was great. They are trying to get out of the base. Once they come out, they will run!

[madcowdisease]

Keep refiners on the radar. Today's action was great. They are trying to get out of the base. Once they come out, they will run!

I think this is due more in part to hurricane Gustav than anything technical or fundamental. In '05 when Katrina and Rita ripped through the gulf and the delivery ports of New Orleans these things were up and away like banshees. i believe the specualtive trader mentality is that imports will be cutoff for a bit and unable to deliever refined gasoline to New Orleans which means, for a brief period of time, TSO and VLO have a monompoly supplying the US with gasoline.

Unless oil goes down precipitously after Gustav I wouldnt expect this to be much more than a short term blip on the radar.

[mark_brantford]

Tomorrow should be interesting, particularly if crude is disrupted and released from the SPR and oil stabilizes or drops, while refining capacity is cut. I assume non-gulf refiners like TSO have the most to gain. We shall see!

ps-TSO has 20% of float short.

[madcowdisease]

Tomorrow should be interesting, particularly if crude is disrupted and released from the SPR and oil stabilizes or drops, while refining capacity is cut. I assume non-gulf refiners like TSO have the most to gain. We shall see!

ps-TSO has 20% of float short.

Reports are crude got slammed down to $111/bl as Gustav weakened

[mark_brantford]

Well, they moved alright! Down :(

[john_for_u80]

Well, they moved alright! Down :(

Refiners like VLO is not moving above 36 and holding so till then they are not a trade. VLO in a congestion area. Same deal with TSO.

When they run, they need to run without going back down. Careful with such trades.

Commodity bulls are going bankrupt!

[Survivor]

Well, they moved alright! Down :(

Yes Sir, It makes absolutely no sense. I do not understand the sell off.
Good stocks and companies hauled out to the wood shed, and beaten.

Cramer blew it when he said PBR is going to 68.00 a share
and it has dropped at least 6 weeks straight.
Well, maybe he meant 10 weeks ago??? Nothing changes and down.

[XOM]

Makes a lot of sense really, you just have to be aware of the mechanicals in place here: The crack spread is largely going to affect the price movement of a pure refiner, so we need to see cheaper cost of goods coupled with higher product demand and sales revenue. What we have instead is lower cost of goods and lower product demand and sales revenue, essentially negating the lower cost of goods. Additionally we need to look at the projected earnings vs analyst estimates for the next quarter, taking into account the cost of crude that was used to calculate forward earnings.

RBOB is currently down 15 cents to $2.70 a gallon, which equates to a pump price of roughly $3.45 Not conducive to a good day in the refinery patch.

Sometimes the refiners will post nice intraday gains on a good overall market day coupled with falling crude prices, this however is a very short term volatile event (lately) and should not be confused with the refiners going on a run unless you beleive the bottom is in the overall market and it's back to the bull market, then gasoline demand should increase. Not likely to see an increase in demand after labor day though, however an early cold winter would increase demand for heating oil so if your refiner has a good market share for that then maybe you catch a break.

Imho, if you can afford to sit on a refiner for a good while, perhaps selling calls and rolling them over month to month, then now may be a decent time to pick one up as an investment. For a trade; buy near the 52w lows, don't be greedy and set a trailing stop past 5% profit, rinse and repeat. Have an exit price for a loss and stick with it, if the overall market takes a beating, so will your refiner.

Anyway, just my 2 cents. The refiners are a tough play at the moment, happy trading.

[Survivor]

Thanks, XOM.

[XOM]

Thanks, XOM.

NP, just my 2 cents though as noted;)

Today's action was a good illustration of crude being negative on the day and RBOB climbing into positive territory with the overall market being mostly negative.

Check out TSO, VLO, ALJ, FTO, WNR, HOC, SUN. Not endorsing any of them just for illustration purposes.

These stocks have been sold off so badly that I think there is a lot of anticipatory money waiting to ride them back up to more realistic levels, but as always...timing is everything, don't catch a head fake, probably a lot of people buried in these just itching to unload.