Hey Gang,
The oil refining sector has been one of the most battered and bruised sectors over the past 18 months. TSO, VLO, MRO, and SUN are some of the majors. If you look at the charts and compare them to the price of oil, you will notice that the refiners fell when oil rose and continued to fall when oil dropped. The key to refiner’s profits is the crack spread.
The crack spread is the difference between oil prices and gasoline prices. As oil prices rise faster than gas prices, refiner’s profits drop as they buy oil and turn it into gas. When gas prices rise relative to oil, refiner’s profits rise. If you have gone to the pump over the past 3 months, you probably notice little change in your gasoline prices. If you look at the oil markets, you will notices that oil has fallen. Oil down + gas stable = higher profits.
The charts for the refiners are very bullish, making new highs and setting higher lows.
Happy Trades,
Jeff
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