Independent refiners benefit from low oil prices
Crude oil prices are on the decline again on the back of a strengthening US dollar and continued supply growth. As most energy stocks plunge to new lows, one sector of the energy market has been surging to new highs.
Independent oil refiners have been reaping the benefits of lower crude oil prices and relatively buoyant gasoline prices. The price difference between crude oil and refined products, known as the crack spread, has continued to widen in the past month.
One prime example is Tesoro Petroleum Corporation, which runs refineries on the US West Coast. A good portion of their crude feed stock is sourced comes from Western Canada, supplied by rail and pipeline. Tesoro also processes light, sweet crude from North Dakota, which also trades at a discount to West Texas Intermediate (WTI).
Tesoro stock (NYSE:TSO) has jumped almost 20% in the past 2 weeks. At the same time, WTI has seen an equivalent decline of almost 20%.
Although Canada does not have any publicly-traded independent refiners, a healthy crack spread should benefit the big integrated majors, such as Suncor, Imperial and Husky Energy.