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Tesoro Corporation Message Board

  • johnnyinphilly29 johnnyinphilly29 Apr 7, 2011 2:32 PM Flag

    Report by Merrill Lynch today - BUY BUY BUY BUY BUY

    "Gasoline cracks have caught up"


    Uneventful DOE – distillate exports revised higher
    DOE stats were relatively benign vs. expectations with a lower than expected gas
    draw as the only notable event. Crude stocks continue to creep higher but with the
    build concentrated on the US West Coast that is essentially disconnected from the
    rest of the lower 48, this has limited implications for oil price direction. Cushing
    stocks were flat leaving other external factors such as strikes in the Atlantic basin
    as perhaps the main driver of a wider Brent – WTI differential that has now moved
    back to ~$14. Utilization nudged slightly higher. Looking ahead, we maintain our
    view that seasonally, high distillate yield can tighten gasoline inventories – and
    with PADD 5 maintenance set to peak at ~400mb/d in mid May, we highlight TSO
    as the potential momentum play within our broadly positive sector view.
    Distillate yield holds steady – but look at the gas crack!
    Distillate yield continues at above seasonal levels, holding steady at ~30% vs. a
    typical seasonal average in the mid 20%’s. Separately, revised DOE monthly
    data shows another upward revision distillate exports to stand at 735m/d - nearly
    double 5 yr average levels and 90% higher above 2010. With US refiners focused
    on maximizing distillate yield, gasoline inventories have tightened in recent weeks,
    - providing support for gas cracks to catch up with distillate and now stand at $25.
    Front month NYMEX gasoline cracks hit a 3 year high with inventories back to 5
    year average levels. With seasonal gasoline demand still ahead, we maintain our
    view that earnings momentum for the US refiners remains on a positive trajectory.
    Extending visibility for Brent - WTI
    Brent – WTI has moved back to ~$14, helped by a sustained crude glut around
    Cushing and underpinning relative distillate strength vs. gasoline. We anticipate
    upward revisions to sector EPS expectations to underpin continued sector support
    where our preferred names are TSO, VLO, FTO, HOC and MRO.
    Table 1: DOE / API Summary

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    • ML has the trend correct..
      Cracks will even extend to 28-30.00 due to Japan & China
      Especially diesel..

      Looks like the big boys wanted to buy in at the 25's--- Headed much higher- 40's by Sept. Buy more at this price seems to be the call. GLTA

 
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