Hello precaud , As a new investor to refiners sector. I owned ..HFC stock prior to its merger(FTO in at 32)....having no clue about the FTO-HFC merger.
Question-what signal will indicate to you that HFC is a 'buy' again.....unfortunately, I am locked in at high levels 53 and 56 levels. ....what news should I watch / listen for CNBC, Kudlow and CO. etc.......to signal HFC moving back to up side?
Per tech chart....1yr chart presently shows HFC just below 200 day mvg avg = weak = sell
Are you watching the technical signals or for certain news to come out?
Is there a web site where one can track or measure LLS vs WTI ratios ?
PER YOUR COMMENTS:
"LLS vs WTI has some relevance, but no one talks about it."
"The discounts that matter to both HFC and VLO profitabilty are the various heavy/sour discounts. HFC discuss it in every conference call yet it seems to fall on deaf ears on this board. And those discounts have really slimmed down, and in some cases, disappeared, this year. I don't find either refiner a compelling buy right now. HFC will hover in this area due to the big divvy payout. VLO, I don't know, I just see nothing that excites me. Every rally in both stocks is being sold into. I still have HFC shares but have sold most of my position in the last 7-8 months and am playing with the house money, so to speak, just collecting the divvy.
The oil bulls keep trying to run up inland light crudes but new supply always takes up the slack. The big added refining capacity in the midwest is all geared toward running Canadian heavies, that keeps a lid on WTI and the heavy discount at the same time. So I just see lots of volatility in the 46-51 range for HFC stock"
For some reason this stock goes down even on 100 + market days and on such days the others in the industry are going up such as PSX, ALJ, and TSO - yes MPC and WNR went down today, but generally they have responded well and HFC is over $4.00 a share less than its 50 and 200 day moving averages. Really no reason to buy HFC until the market changes its perception for HFC.
Hi Bill, sorry for the delayed reply. I find it impossible to boil down to one signal.
a) There is definitely a seasonality to the refiners; stock prices typically bottom in November, and peak in Apr-May. The peak came a little early this year due to gyrations in the oil patch, and the stock had run up so quickly. June-July is typically weak, unless hurricane season comes hard and early.
b) Assuming cracks will stay positive for the whole group (inventories suggest that will be the case), for HFC the major indicators are the discounts for WTS (West Texas Sour) and WCS (Western Canada Select). They run more of those than any other crude types. It used to be easy to track these via Bloomberg. Now you have to be a paid subscriber to get them.
c) It helps to stay abreast of the forthcoming developments as far as what refineries in their market areas will be expanding, shutting down for maintenance, etc. That is what drove the most recent decline in WCS discounts. Over 200k bbls/day of capacity came back on line in IL, re-optimized to run WCS. Suddenly WCS demand is closer to production and the price jumped, reflecting only transportation costs and yield differences. I don't expect that situation to change soon. Generally speaking, USA refiners have tooled up to run more "cheap" heavy crude, but the discount for it has evaporated in the process. IMO, the next "oil price war" will be in the light crude segment, caused by Baaken light sweet production outstripping demand and putting pressure on WTI. HFC will benefit from that but not in the outsized way it benefits from cheap WCS.
I hope this helps. Notice the word "Brent" never entered into the discussion. It is at best a secondary/tertiary indicator.
Thank you, Precaud!! I did the same, by selling some of my refinery purchases, and holding the rest, like you. But, I now have renewed interest. In your opinion, will supply increases from Bakken and Canadian Sands still drive down WTI even with the upgrade in refining capacity and improvements in take-out capacity? From your note above, that seems to be the case. Thus, the question becomes, are the Midwest refiners fairly valued at current prices or prone to move again? Thoughts?