A play on refiners

Readers of my earlier posts will know that I have been long the refiners for some time now. I thought I would take some time to elaborate on this trade thesis. Refiners have benefited recently from an increase in crack spreads (def: crack spread). The wider the crack spread, the more profitable refining is. This should translate directly into the bottom line during earnings.

Another important thing to note is that the refiners have held up well technically (WNR, VLO), leading to some attractive looking charts. WNR is my personal favorite because it is west coast and has a high short position. I am attracted to the west coast prospects for several reasons. First west coast refiners won’t be hit by hurricanes that plague the Gulf of Mexico and generally take off some refining capacity. Second, should Japanese refining go offline or be reduced due to the situation there, WNR is positioned to benefit.

Earnings for refiners kick off Wednesday, April 27th. Attached is a report outlining some details about refiners.

MS Refiner report

Disclosure: Long WNR

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