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Things Are Looking Up For Marathon Petroleum

When stocks in a sector come under pressure, as has been the case with energy stocks over the last few months, the speed with which an individual stock bounces back when things begin to turn around can tell you a lot. If there are sound fundamental or company specific reasons for a stock to fall with everything else then any bounce back will be somewhat muted initially. Conversely, when something is dragged down with everything else despite decent prospects the snap back can be quite spectacular. When a stock jumps over 15 percent from its lows in less than a week, then, it demands some attention, and that is exactly what happened with Marathon Petroleum Corporation (MPC) in the four trading days from October 16th to the 21st as panic receded and oil prices started to stabilize.

MPC is the refining, transportation and marketing company arm of Marathon and trades separately from Marathon Oil (MRO) which is the production company. In general, refiners are less impacted by falling oil prices than producers. Their profitability depends on the spread between the price of crude oil and the price of the finished products, gasoline and diesel for example. As any motorist can tell you, when oil prices fall rapidly, fuel at the pump is slower to drop in price, so you could even make a case that falling oil prices actually benefit refiners.

Of course, it isn’t that simple. Even if margins do increase slightly as a percentage, a lower selling price for the end…

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