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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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Two Energy Ideas: Refiners and the Back of the Crude Curve

Two energy ideas to touch upon today, now that the debt ceiling debacle is (at least for now) over:  Refiners and the back of the crude curve.

Refiners have caught a bid recently and, out of the blue, some of them have rallied more than 10% in less than two weeks.  The downturn in these stocks was fairly easy to see coming, even if it was overdone – but the subsequent rally in the shares was far less easy to see.

I’ve thought that through the 3rd quarter we’d see a compression of the WTI/Brent spread, a proxy for cracks and refining margins.  From that compression, we’d see a less than stellar report from the refiners come October and some stock weakness.

For a brief moment during the 3rd quarter in fact, we even saw WTI prices go over Brent, proof that – once again – oil traders are constantly befuddled by this benchmark ratio and how to play it (and I include myself in this characterization).

Difficulty in Libyan supplies, squeezing Brent, combined with a few mid-con refining outages here in the US, caused a further surplus of crude in Cushing.  Together, they’ve pushed the spread back out between the two benchmarks to close to $10 in very short order – catching a load of traders both short the spread and short the refiners.  

But is this quick trend buyable?  Should we reload on refining stocks today?

You’d intuitively think not – both physical…




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