WTI is down $1.70 to 96.58, while Brent is barely off at $109.72.
This is extremely bullish for refinery stocks, particularly those who refine crude ‘mid-continent’. Crude derived from W. Texas do not have the luxury of pipeline infrastructure to transport around the country. Instead, it is trucked around, circa 1900. Because of this annoyance, crude from W. Texas sells at a discount, even to WTI prices. Expanding on that point, gasoline or refined products are priced in Brent, making the WTI-Brent spread a supreme factor in determining profit margins for refinery companies.
The spread has widened from $3 to $13 since September, but down from $20 achieved in March.
Since March, many refinery stocks have traded down because of the tightening spread, spearheaded by analyst downgrades.
Look for said analysts to eat crow. The sector is back in play again.
Top picks: ALJ, ALDW, WNR, HFC and DK