iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,417 Blog Posts

Myth or Fact: Sell Refiners in the Spring?

Because I am long the refiners, my ear is to the ground, regarding investor sentiment in the refining space. A lot of people seem to believe the trade is to be long refiners, ahead of the driving season, then sell as gasoline rips the faces off consumers.

The gagillion dollar question is, has this trade proven to be successful in the past? Let’s take a gander, shall we? Follow me into the dark corridors of The PPT.

I will pick three refiners for this study: TSO, HOC and VLO, due to their institutional favorite status.

TSO

April
Stats for the month:

Avg Return 2.46
# months TOTAL 28.00
# months UP 17.00
# months DOWN 11.00
months UP (%) 60.71
months DOWN (%) 39.29

May
Stats for the month:

Avg Return -0.50
# months TOTAL 28.00
# months UP 15.00
# months DOWN 13.00
months UP (%) 53.57
months DOWN (%) 46.43

June
Stats for the month:

Avg Return -0.94
# months TOTAL 28.00
# months UP 14.00
# months DOWN 14.00
months UP (%) 50.00
months DOWN (%) 50.00

——————————————-

VLO

April
Stats for the month:

Avg Return 3.55
# months TOTAL 30.00
# months UP 17.00
# months DOWN 13.00
months UP (%) 56.67
months DOWN (%) 43.33

May
Stats for the month:

Avg Return 1.69
# months TOTAL 26.00
# months UP 17.00
# months DOWN 9.00
months UP (%) 65.38
months DOWN (%) 34.62

June
Stats for the month:

Avg Return -4.15
# months TOTAL 29.00
# months UP 11.00
# months DOWN 18.00
months UP (%) 37.93
months DOWN (%) 62.07

———————————————–

HOC

April
Stats for the month:

Avg Return 3.93
# months TOTAL 19.00
# months UP 11.00
# months DOWN 8.00
months UP (%) 57.89
months DOWN (%) 42.11


May

Stats for the month:

Avg Return 2.32
# months TOTAL 18.00
# months UP 12.00
# months DOWN 6.00
months UP (%) 66.67
months DOWN (%) 33.33

June
Stats for the month:

Avg Return 0.40
# months TOTAL 19.00
# months UP 8.00
# months DOWN 11.00
months UP (%) 42.11
months DOWN (%) 57.89

The results say sell in June, if you are interested in taking profits. What’s important to note is how did refiners do in 2006-2007? After all, the last time crack spreads were this wide was 2006-2007. It would make sense to try to learn from the trading patterns of this industry when the fundamentals were almost identical, sans the extra bonus we have now with Brent-WTI spread.

TSO

2006
April: +2.36%
May: -2.43%
June: +9.2%

2007
April: +21%
May: +2.1%
June: -7.5%

VLO

2006
April: +8.3%
May: -5.1%
June: +8.4%

2007
April: +8.9%
May: +6.4%
June: -1%

HOC

2006
April: +4.1%
May: +8.1%
June: +15.6%

2007
April: +7.25%
May: +10.2%
June: +6%

The verdict: refiners did exceptionally well throughout the Spring months and into the Summer. If anything, sell in June, then come back for the ever exciting hurricane season aka “say goodbye to your GOM oil rigs, fuckface.”

In closing, here is how WNR performed month by month, in 2007, compared to the present.

WNR
2007
Jan: +7.4% Feb: +5.7%, March: +35%, April: +1.5%, May: +24.1%, June: +17.8%, July: -3.98%, August: -6.6%, Sept: -21.6% (Bear Sterns), Oct: -9.6%, Nov: -21.2%, Dec: -16%
2011
Jan: +15%, Feb: +33.6%, March: +4.2%, April: +3.4% (so far)

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18 comments

  1. Moolahheaven

    Fly kicks ARSE!!! 😉

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  2. Juiceyfruit

    Didn’t Cramer (the idiot) basically say to sell the pop on their reports, since he’s expecting kick ass qtrs ?

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    • The Fly

      That’s such a disingenuous suggestion by Cramer, especially since he knows by saying it now, people will act now. If he wanted people to sell later, he should have waited until then.

      Also, he panned WNR when someone called in.
      He is trying to have it both ways:
      Bullish and bearish at the same time. Bullshit

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  3. Kunze5280

    This post epitomizes why I read this blog daily. FIG.

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  4. rookie

    on the wire – Gaddafi To “Give Ceasefire A Chance” .. yet crude continues to march higher. refiners are sellers of gasoline in the futures market – not sure how much more they can charge before demand destruction. last month gasoline demand was down 1.2% from last year.

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  5. Bullish

    Looking forward to the day we can break up seasonality by a specific year… Really looking forward! ETA on that feature?

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  6. flyaway18

    If you were trading the precious metals this wouldn’t even be an issue.
    I’d step into some TBT here too for the rocket ride to 40-plus.

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  7. pedo

    Senior,

    Great work re the refining space due diligence. Really would love to get your take on the silver market right now. Any thoughts of getting back into it in what appears to be an inevitable march to $50? I remember you saying back when it was in the mid-$20s that it had a ways to go.

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  8. GYSC

    I did buy WNR last week even though the charts were horrid. Ugh.

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  9. Marc David

    Cease fire with a dictator that has said many times he will not step down and “rebels” that say anything other than him not stepping down is unacceptable. Maybe it’s just time to re-arm?

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  10. shipwrecked&alone
    shipwrecked&alone

    VLO guidance on 4/26 is critical IMO especially their spread guidance going forward. WNR will trade on that news until their 5/5 earnings. By 5/5, they will really be guiding on 2 quarters bagged up 1Q and 2Q since 2Q is half over. Spreads started widening first few weeks of 1Q. That should push 2Q estimates way up for WNR assuming 1Q is too low already now and assumng things stay as is until 4/26. What I am saying is that 2Q will get raised double time. Question to board. Does it make sense that in the last 30 days analyst estimate revisions are: TSO .48 to .56, VLO .49 down to .45, WNR .27 to .28. WNR’s 2Q estimates in the last 30 days from .64 to .67? 2Q should get the biggest push up it seems to me??

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  11. Trading Nymph

    In the past I have played that trade. But I am obsessed with China so I have no idea how it will play out this year. Tonight Shanghai Comp is acting like Giddy little Grils, my guess is that China Govt leaked the Friday CPI data again and its not as bad as expected….gossipy little girls.

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  12. The Fly

    China lies about everything. You are obsessing over a lie. Think about it.

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