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Closing US Refiners

Launched: March 2, 2015, updated July 10, 2015, and closed October 29, 2015


MRP is closing our recommendation to be Long US Refiners. When we relaunched the theme on March 2, 2015, the oil price divergence was widening between global prices as measured by Brent and local West Texas prices.

At the time of the recommendation, MRP noted that "While refiners everywhere face higher input costs, US-based refiners are again enjoying a relative price advantage, as measured by Brent's premium to West Texas. Eventually, as rail and pipeline connections are expanded and the US continues to ease export restrictions, North American oil production will be re-integrated into global markets.  For now, US refiners stand to benefit from the difference between US and global oil prices, which MRP expects to continue at least through the next two quarters."
THE BRENT OIL PRICE PREMIUM TO WEST TEXAS HAS NARROWED

Source: Bloomberg, McAlinden Research

Two quarters on, the price differential has narrowed, oil producers are connecting to global markets through other infrastructure links as highlighted below in today's Daily Intelligence Briefing, and US production has slowed while imports have again turned up. The upshot is that US refiners no longer appears to be in the pricing sweet spot they enjoyed earlier and therefore it's time for MRP to close the theme.

US REFINERS' LEAD THE ENERGY SECTOR

 Source: Bloomberg, McAlinden Research

Last updated October 29, 2015
 
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Warren Hatch, PhD, CFA
Portfolio Management and Global Investment Strategy
McAlinden Research Partners

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