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The Zacks Analyst Blog Highlights: Valero, Royal Dutch, HollyFrontier, Phillips 66 and Marathon
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For Immediate Release
Chicago, IL – October 5, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Valero Energy (VLO - Free Report) , Phillips 66 (PSX - Free Report) , Marathon Petroleum (MPC - Free Report) , Royal Dutch Shell and HollyFrontier .
Here are highlights from Friday’s Analyst Blog:
Oil Posts Quarterly Gain as Supplies Fall for Third Week
U.S. oil prices eked out a quarterly gain after a government report revealed a weekly decrease in crude supplies that was contrary to expectations. The third straight fall in domestic oil stocks was accompanied by a decrease in distillate inventories.
Additionally, the agency said that gasoline stockpiles increased and oil supplies at the Cushing, OK, delivery hub rose too, but these had little effect on the positive response to the Energy Information Administration ("EIA") data. On the New York Mercantile Exchange, WTI crude futures gained 93 cents, or 2.4%, to settle at $40.22 a barrel on Wednesday. The commodity moved 2.4% higher over the past three months.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Sep 25.
Crude Oil:The federal government’s EIA report revealed that crude inventories fell by 2 million barrels compared to expectations of a 1.9 million-barrel build. The combination of a sizable increase in exports and a ramp up in refinery activity accounted for the surprise stockpile draw with the world's biggest oil consumer even as domestic production stayed firm. This puts total domestic stocks at 492.4 million barrels — 16.5% higher than the year-ago figure and 13% higher than the five-year average.
On a bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) increased 1.8 million barrels to 56.1 million barrels.
The crude supply cover — at 37 days — was unchanged from the previous week. In the year-ago period, the supply cover was 25.3 days.
Let’s turn to the products now.
Gasoline:Gasoline supplies rose for the first time in eight weeks. The 683,000-barrel increase is attributable to higher imports. Analysts had forecast a decline of 1.3 million barrels. At 228.2 million barrels, the current stock of the most widely used petroleum product is around 1% lower than the year-earlier level but1% above the five-year average range.
Distillate:Distillate fuel supplies (including diesel and heating oil) decreased for the second week in a row. The 3.2-million-barrel fall reflected a pullback in production. Meanwhile, the market looked for a supply draw of 1.7 million barrels. Current inventories — at 172.8 million barrels — are 31.6% higher than the year-ago level and 21% higher than the five-year average.
Refinery Rates:Refinery utilization was up1% from the prior week to 75.8%.
Concerns Remain Despite Quarterly Gain
While oil prices have come a long way since the depths of minus $38 a barrel in April, lingering signs of demand weakness are still evident. As long as the coronavirus outbreak continues unabated (as is now the case in India and across Europe which is fighting the second wave), there will be pressure on the demand side of the equation. In particular, there are apprehensions about the recovery in refining throughput.
Agreed, gasoline consumption has improved from their pandemic lows but they remain weak. Even refinery utilization in the United States remains far below the usual capacity usage at this time of the year.
As it is, during the August-October period, the U.S. refining network in the Gulf Coast experiences regular drops in utilization due to the impact of hurricane shutdowns. Moreover, with the onset of the refinery maintenance season, traders expect the glut to worsen.
As proof of the bearish environment, downstream operators, including Valero Energy and Phillips 66, have drastically reduced processing capacity to cope with demand erosion caused by the efforts to stem the spread of coronavirus. Demand has still not picked up to a level where the operators can think of restarting/increasing their refinery work. Meanwhile, Marathon Petroleum has announced its plan to indefinitely stop production at its Gallup and Martinez refineries in response to collapsing product demand. More recently, Royal Dutch Shell has said that it will cease operations at its 110,000 barrel-a-day refinery in the Philippines. The sectoral woes have prompted the likes of Phillips 66, Marathon Petroleum and HollyFrontier to move toward renewable diesel.
Overall, fears are mounting that oil demand recovery from the coronavirus pandemic will be sluggish in the second half of 2020. A period of sustained low usage of the fuel would create a new headwind for the commodity.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Valero, Royal Dutch, HollyFrontier, Phillips 66 and Marathon
For Immediate Release
Chicago, IL – October 5, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Valero Energy (VLO - Free Report) , Phillips 66 (PSX - Free Report) , Marathon Petroleum (MPC - Free Report) , Royal Dutch Shell and HollyFrontier .
Here are highlights from Friday’s Analyst Blog:
Oil Posts Quarterly Gain as Supplies Fall for Third Week
U.S. oil prices eked out a quarterly gain after a government report revealed a weekly decrease in crude supplies that was contrary to expectations. The third straight fall in domestic oil stocks was accompanied by a decrease in distillate inventories.
Additionally, the agency said that gasoline stockpiles increased and oil supplies at the Cushing, OK, delivery hub rose too, but these had little effect on the positive response to the Energy Information Administration ("EIA") data. On the New York Mercantile Exchange, WTI crude futures gained 93 cents, or 2.4%, to settle at $40.22 a barrel on Wednesday. The commodity moved 2.4% higher over the past three months.
Analyzing the Latest EIA Report
Below we review the EIA's Weekly Petroleum Status Report for the week ending Sep 25.
Crude Oil:The federal government’s EIA report revealed that crude inventories fell by 2 million barrels compared to expectations of a 1.9 million-barrel build. The combination of a sizable increase in exports and a ramp up in refinery activity accounted for the surprise stockpile draw with the world's biggest oil consumer even as domestic production stayed firm. This puts total domestic stocks at 492.4 million barrels — 16.5% higher than the year-ago figure and 13% higher than the five-year average.
On a bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) increased 1.8 million barrels to 56.1 million barrels.
The crude supply cover — at 37 days — was unchanged from the previous week. In the year-ago period, the supply cover was 25.3 days.
Let’s turn to the products now.
Gasoline:Gasoline supplies rose for the first time in eight weeks. The 683,000-barrel increase is attributable to higher imports. Analysts had forecast a decline of 1.3 million barrels. At 228.2 million barrels, the current stock of the most widely used petroleum product is around 1% lower than the year-earlier level but1% above the five-year average range.
Distillate:Distillate fuel supplies (including diesel and heating oil) decreased for the second week in a row. The 3.2-million-barrel fall reflected a pullback in production. Meanwhile, the market looked for a supply draw of 1.7 million barrels. Current inventories — at 172.8 million barrels — are 31.6% higher than the year-ago level and 21% higher than the five-year average.
Refinery Rates:Refinery utilization was up1% from the prior week to 75.8%.
Concerns Remain Despite Quarterly Gain
While oil prices have come a long way since the depths of minus $38 a barrel in April, lingering signs of demand weakness are still evident. As long as the coronavirus outbreak continues unabated (as is now the case in India and across Europe which is fighting the second wave), there will be pressure on the demand side of the equation. In particular, there are apprehensions about the recovery in refining throughput.
Agreed, gasoline consumption has improved from their pandemic lows but they remain weak. Even refinery utilization in the United States remains far below the usual capacity usage at this time of the year.
As it is, during the August-October period, the U.S. refining network in the Gulf Coast experiences regular drops in utilization due to the impact of hurricane shutdowns. Moreover, with the onset of the refinery maintenance season, traders expect the glut to worsen.
As proof of the bearish environment, downstream operators, including Valero Energy and Phillips 66, have drastically reduced processing capacity to cope with demand erosion caused by the efforts to stem the spread of coronavirus. Demand has still not picked up to a level where the operators can think of restarting/increasing their refinery work. Meanwhile, Marathon Petroleum has announced its plan to indefinitely stop production at its Gallup and Martinez refineries in response to collapsing product demand. More recently, Royal Dutch Shell has said that it will cease operations at its 110,000 barrel-a-day refinery in the Philippines. The sectoral woes have prompted the likes of Phillips 66, Marathon Petroleum and HollyFrontier to move toward renewable diesel.
Overall, fears are mounting that oil demand recovery from the coronavirus pandemic will be sluggish in the second half of 2020. A period of sustained low usage of the fuel would create a new headwind for the commodity.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.