maybe weak shorts scrambled to buy, but that is it. anyone that invests/trades based on fundamentals sold the sector short much higher and are safe and sound. i am well aware of where wti/brent is as well as bakken diffs. i am also well aware of where margins are and what capture rates look like. margins are still weak.
my "brilliant assessments" are based on fundamental analysis and 25 years in the biz. what refinery did i run? none, but klesse, who is a nice guy, is nothing more than a "figure head" who moved up the ladder playing corp politics well. speaking of, why don't you look how well vlo managed their assets the last 7-10 years and the BILLIONS they lost on hedging and trading not to mention missing the shift in wti/brent structure. i digress......
i can tell you this. i see about 1.8-1.9million bbls of new refinery capacity coming online in 2014 with a chunk of it in q1'2014. i see global demand being up maybe 1.0-1.1 million bbls per day and that will lead to one thing. more euro/med refining capacity shutting down. that will take time and you are looking at second half 2014 at the earliest before that happens. refiners are "sell rally" stocks as they simply are not deeply discounted enough to warrant a longer term investment. tso might warrant a look in the $30-32 range, but not before then unless there is a macro shift that i don't see happening.
p.s. you can save your insults. if you to openly discuss the fundamentals of the sector i am open to it. otherwise. please save your breath.
you must be smoking dope! this rally was nothing more than "dumb money" buying the sector on a day the dow was up 300pts and on the back of the rfs rumor that they will cut obligations significantly. Rins are down to about 28-30cpg. now let me explain something to you and the vlo ceo.
RINS were/are a cost. that cost can be passed through to the end user. that said, vlo #$%$ about rins costing 800m is untrue as that $$ was passed through. now lets say rins go to zero. what then? you will see more gasoline imports into the u.s. because importers no longer have to deal with that massive cost. then you have to content wilth a drop in diesel exports because there is less incentive to export bbls and avoid rin cost. net net, you will see the 211 come under serious pressure and crk spreads turn back lower as domestic supply swamps demand.
stupid money bought today. nothing changed for tso, mainly because their rin obligation was minimal to begin with. that said, they will however feel the full effect of lower margins which will be the result of an rfs revision. overall, today was a great opportunity to sell and that is what i did on the close. i did buy some 41.50 calls that expire tmmrw so the sale was mainly locking in that gain. i did put on a small "new" net short and only hope lemmings buy more tomorrow.
all the new length that came into the mkt today will be barfing out when we break $40 as earnings start coming out. $50 is a pipe dream.
Firstly, tso will go lower than 34.00. Currently you have some fund buying that has slowed the rate of decline. This buying will stop and we may even see them pike out when the realize how back q3 actually was, q4 is shaping up to be, and how cal 2014/2015 eps estimates are way too high.
Gulf coast gasoline cracks vs. wti are $0, vs Lls around -4.00, vs Brent around -6.00bbl. People.....that's 50% of your product! West coast balances are worsening and by the end of q4 that train wreck will be upon the tso bulls.
No reason to own tso or the sector. Those golden balance sheets are going to start bleeding real cash!
Wells Fargo cut Q3 estimate to .40! That half the already cut estimates at around .80-.85
Your looking at a horrible q4 and then an ugly first half 2014 balance. Say hello to my little friend!!! Tso is heading to $28-30 and I am not even sure it will hold there. Just so awesome that they doubled up on capacity in the worst gasoline market in the states at the peak of the cycle. You get what you pay for guys!
you see "cup and handle" and i see a double top on the ten year yard at $65/66 along with a head and shoulders(left shoulder built in march at $58, head in late may at $65 when it spiked on the closing of carson, and the right shoulder was put in the first week of august. the measured move says tso is heading to $32/33.
the oct option was a put position being rolled from sept to oct. the put hedge was rolled on wed or thurs if you check the option volumes.
re the resumption of brent strength. Libya is back up so expect light sweet in europe to weaken. add in more n.w.e refinery closures and brent may underperform wti longer than you expect. also, don't look from wti/brent to head back to -$25.00 again. the best you might see is -$7.00-9.00bbl depending on where mid cont crude diffs are. bottom line, cushing is getting low on bbls and there is a lot more take away capacity in the mid cont. the cheap crude gravy train is over, but the share prices don't reflect this.
how about railed bakken costs to l.a.?? delivered crude cost was more expensive than ANS just last week. where is that cash machine from doubling up on capacity? answer, it is busted!
TSO might try to open higher on monday, but honestly i think we will see a "mid way" gap and it will open up weak and trend towards teh jan low at $40.00 this week befroe breaking down further to retest last fall's low around $34.00 ish.
i "might" sell some puts when tso is at $30, but i have no plans to do anything buy short rallies until then. good luck to you and i hope you don't have to wait the 2-3 years tha ti think you will to see $50+ again.
I anticipate the support in the $45 area to give way(starting tomorrow) and a break very quickly to $40 at which point the bulls will try to defend again. Yesterday's option trading and price action seems clear. Someone rolled put length for sept puts into oct puts and then ramped up the share price yesterday and early today before the rally failed. Expect new longs to bail on the break of $44.00
West coast margins have been terrible. The rally on gasoline differentials is fading and boreal margins are much lower year on year. Why hold a company/sector with declining margins and worsening fundamental? Answer, you buy went it is deeply discounted and that won't be until it's in the 20's.
P.s. When WS claims they "beat" earnings I will laugh my #$%$ off!
Again, Fischer is not an equity analyst and just parroting the option of some WS analysts. Wti/Brent has been tightening up and will continue to do so. You have enough line fill for the next 9 months that we will be running at tank bottoms in Cushing shortly. Refining margins are bad, and getting worse. The net result of that is that you will see more closures in Europe. The result of that will be lower demand for Brent related crudes and a strong wti/Brent spread further done the curve into 2015.
Advising people to but refiners now is borderline moronic. When you see then trading at 2.0/2.5 ev/Ebitda on a forward basis I will start selling puts to collect premium. I see very little on a ford basis to remotely consider getting long.
Firstly, Fischer did not say to buy refiners, but he was pimping nat gas and a few names in that sector. Second, if nat gas prices rise, which they should given increased demand from domestic demand(power generation, exports, etc) that would be a negative for refiners as operating costs would rise. Third, nat gas will have a hard time staying any higher than $5.00-5.50(other than short term weather spikes) because RoI on shale wells with 4.50 gas runs north of 30%! As a result, sustained 4.50-5.00 will bring more gas(wet & dry) to the market. Exports...... That's the wild card.
Re Fischer. He owns MBF which is his clearing firm. He has a bunch of ex floor locals clearing trades through his firm and loves volatility because it drives up trading volumes and puts money in his pocket. The one thing mark is not is an equity energy analyst. I would not take any advice he gives regarding stocks. Second, he is not an energy oil analyst. He does not know the geology of fields or global supply/demand balances. As a result, I would not follow his view on oil prices(I think he is simply parroting others views, but has not deep understanding of the drivers).
That said, Mark devised the "Fischer system" for nay ex day traders 25 years ago. A version of "pivot analysis". It made his clearing firm bucks and helped floor traders learn to trade and manage risk.
Back to Tesoro. Currently west coast carbob is about 35cpg over the merc in the spot maker. It is highly backwardated and bbls by October are 15 cog over the merc. Margins are still terrible and here is the kicker. The delivered cost of bakken is not higher than ANS!
Tso will be $30-32 before it finds a base. Short rallies and keep your poder dry if you want to buy. Advising people to buy now, and buy more if prices keep falling, is idiotic and worthless advice.
Seriously?? Is that the sum of your analysis & hope? Let me fill you in on some "stuff".
Tso's addition of Carson doubled their exposure to the California gasoline market which is the worst market for gasoline outside if Europe. Margins are now so bad basis the wti,ans and Lls that we are hearing talk of run cuts. One problem, demand is down year on year, but u.s. refinery throughput are 1.6 million bbls per day higher! Any temporary blip higher will not last as topping margins will quickly collapse again. What then... The market has to got to negative margins for a sustained period of time to shut down at least 1-1.5mbpd of capacity in the Atlantic basin. As a result, that great free cash flow tso wants you to believe will be safe and sound will evaporate. Kiss the share buy back goodbye and get ready for a much lower share price.
Short any/all rallies because tso will be $30.00 before it starts to base. Then it will take until 2014 before things start to possibly improve.
Re the wti/Brent: after this weeks resumption of Cushing draws the wti/Brent spread has come into -5.50. The Cushing draws will continue through the balance of the year, maybe a pause during fall ref maint, and we may even see the wti trading over Brent as European margins stay under pressure. The impact will be significant for coastal refiners as their ROI expectations will drop from 20-40% on projects to flat/negative. The result will be significant drops for free cash flow which will result in a halt to share buy backs as they struggle to maintain dividends. Tso has a fairly high capex for 2014 which will only add pressure on them and their cash management.
The dumb money buying into the sector currently thinking their is "value" in the sector will be disappointed. They will be looking at significant equity loses while they tie money better deployed elsewhere. Equity crude producers look far better to me than a refiner for the next 12-18 moths.
I do not see an positive catalyst for refining on the horizon. Regarding "discounted value" it is not even remotely close. Looking at ev/Ebitda it appears cheap now, but expected earnings are beyond way too high. Looking for $30.00