About 30 days from now, we'll see how the Q went. I am looking forward to it, and at this time of year, that time will fly by.
Well, we didn't have to wait long before tensions escalated. Saudi air strikes tonight on Yemen. What gets me is the traders running WTI up in sympathy with Brent. I guess it could be some short covering, but WTI traders have moved right past the big inventory builds the past week on weaker dollar news and now they will justify a move higher on tensions. I guess it could be some short covering, but it really makes no sense as WTI can not be exported. If WTI moves higher tomorrow, the talking heads should just be honest and say too much speculative money is moving in from hedge funds, banks, ETFs and others and they basically can push this commodity any direction they want it to go. It actually isn't a bad thing for CVRR for inventory pricing, and will likely push up gas and diesel prices as well. So hopefully, the crack spread will be maintained or possibly even expand w/o an increase in the WTI/Brent spread.
As far as the Iran deal, it is inconceivable to me that anyone would trust Iran on anything, but least of all nuclear security in the region. They have a long history of hatred towards the West and continually lie for their own devious benefit. However, with this administration, I have learned to expect the irrational. GL
On fast money, the traders were talking about Yemen's location and expect the risk premium on Brent to increase from the conflict. Yemen is on Saudi Arabia's border and on the north side of the Gulf of Aden where crude moves through to the Suez Canal. On the south is our old Somali pirate friends, so an unfriendly government on the north is not good for this region, or tanker transport. Tim and Brian believe this is a Brent issue that will cause Brent to move higher and Tim thought the WTI/Brent spread could increase to $15 by summer on the news. If this happens, CVRR will likely benefit. GL Longs.
Thanks Blue. I see you used Gulf Coast fuel prices, which are typically lower than the standard NYMEX gasoline and diesel prices. If you use the EIA data to calculate the standard NYMEX 2-1-1, you'll find January was higher, Feb lower, and for the three weeks ending 3/20/15, March has been the best month of the quarter and continues to be great. I am reluctant to share my prices or method at this point, but if interested, I will point you in the right direction. I have back tested to the calculations to past CVRR reports and my average was about 7 cents different than what CVRR reported as the NYMEX 2-1-1 average for Q1-2014 and Q4-2014. Regardless, CVRR is looking like they will turn in a VG quarter. Also, remember that the Q3 2014 distribution was affected from the fire early in that quarter and its lingering effects if I remember right. GL
Agree Barjonicat. I should have added that my outlook for the strong crack spread to be maintained is over the coming weeks and months meaning I expect the improvement will not only be realized in Q1, but Q2 as well. Therefore, I see the potential for some meaningful capital appreciation into summer, but it may require a little patience. GL to you.
For the most part, this is what I was counting on. Crude inventories were up 9.6 million barrels, while total gasoline inventories fell 4.5 million barrels. Distillate fuel inventories increased .4 million barrels. Gasoline inventories fell even though refinery utilization was up to 88.1% producing more gasoline at a rate of 9.8 million barrels/day. This clearly indicates a nice pick up in demand.
On the news, diesel and gasoline jumped, and continued their climb throughout the day. Crude followed higher after the Fed announcement and strong general market rally, but at a lesser percentage. As a result, the 2-1-1 crack spread once again rose to above $30/barrel, and several refining stock had nice percentage gains by the days end.
Going forward, I would expect some further divergence between crude and fuel pricing with the WTI price held in check to trending down a bit, and fuel prices stable to trending higher in line with the traditional seasonal pickup in the demand for gasoline and diesel. GL longs.
Thanks for the input frog. The weather turned really nice this past weekend in the central Midwest. So, I am thinking the next inventory report will show increased fuel demand with Spring upon us, and crude will be more of the same.
I sold several calls when we got into the $24-$25 range, but continue to have a position. Wasn't sure I wanted to sell any, but had some nice % returns, so thought I would lighten up a bit. If this market corrects and pulls this thing back down another buck or so, I will look to load back up again. Were in the home stretch now to quarter end. GL.
Yep, if you have the big bucks you can move the market to line up future entry and exit points, but in this case, the drop to $20 was probably a natural decline in conjunction with the tanking energy sector and they took advantage of the opportunity. I too added thinking the spring and summer quarters would surely be better if there was a misfire and so far, so good. I am looking forward to the Q1 report as it should be VG. GL to you.
rfritz, sorry if I missed a filing. I see a 13G filed 2/13/15 with the triggering event date of 12/31/14. It reflects Goldman Sachs Asset Management owning 5,981,053 shares. Not sure why the difference with the 6MM+ report, unless they owned some other shares in other entities. I may not be using a site that is as up to date as yours (nasdaq). Anyway, I thought it was interesting.
Goldman increased their stake in NTI during Q4 by 3,060,661 shares to 6,380,038, or a whopping 92%. They also increased their already big stake in CVRR by 59% to 4,017,340 shares. Apparently, they liked the value and the sector. GL
During Q4, Goldman added 1,493,778 CVRR shares to 4,017,340, a 59% increase. They also added big time to NTI, up 3,060,661 (92%) shares to 6,380,038 shares. Since they typical invest for the longer term, it appears they saw value and have belief in the sector. GL
Sentiment: Strong Buy
I may have gotten a little long winded. Basically, just wanted to say that the crack spread is great and it looks like it should continue for some time.
To add just a bit, the crack spread is the gross operating margin to refine one barrel of crude before the operating expenses. The bigger the better for refiners. Gas and distillates trade independently to oil, but often follow Brent. That is why when the Brent/WTI spread widens, the crack spread often widens as well. However, this is not always the case. You can have a more narrow Brent/WTI spread and still have decent refining margins based on the gas & diesel prices as compared to WTI.
Currently, WTI has a huge inventory problem and last week, the EIA reported inventories grew over 10 million barrels. To make matters worse for crude pricing, the EIA reported refinery production declined. Also, gas inventories were flat, and distillate inventories declined. I don't know if the lower refinery utilization was from the strike or seasonal change over (maybe a little of both), but I expect fuel demand to pick up in a week or two following this last big snow storm, and diesel inventories are becoming tight.
The day after the report, WTI went up later that day reportedly "because Cushing inventories only grew 1 million barrels (less than expected). IMO, crude should probably have went down some, but the thought process was manipulated buy some key buying. Anyway, I am thinking WTI should remain in a relatively stable range and/or trend down a bit while gas and diesel may head up some in a couple of weeks from increased demand. The central Midwest is suppose to have some warm weather this next week, so farmers will be hitting their fields and others will be getting on the road just to get out of the house. GL
Sentiment: Strong Buy
Thanks for the info. Nice market action today in a down day and broke through the $20 level. Also, seemed to be some interest in call buying today. Anybody else feel a little run coming on? It is still cheap and below its more typical trading range.
Sentiment: Strong Buy
I sure like how Q1 is going so far. I also like to the desalter projects longer-term. They can replace Syncrude with Bakken and get a bigger discount on the another 15% of their feedstock. This project won't come into play for some time yet, but I like management/ownership moves. GL and enjoy the ride.