This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Refiners May Have Already Peaked For 2014

Stocks in this article: VLO TSO ALJ DK HFC UAL PBF

NEW YORK (TheStreet) -- Sun, fun and relaxation are typically associated with the summer months, but those investing in the refining space may find the upcoming season far less compelling than in years past. 

According to Colorado State University, the upcoming 2014 Atlantic Hurricane Season, which begins on June 1, is not expected to be very active this year (cue the band) thanks to an expected El Nino effect. That means the price of retail gasoline will likely be kept in check, something that may take some of the sizzle out of the refining crack spread during a time when it typically sees a bounce. Then add into the mix forecasts for temperatures to be above-normal in many parts of the country, and refiners may actually see less demand for gasoline as summer driving plans become less favorable. 

Then there's the Energy Information Administration (EIA). The government agency is predicting the price of a gallon of regular gas to drop to a national average of $3.57 per gallon through September, down from the $3.58 per gallon average seen last summer. That estimated price may prove to be high since there is a notable boost to North American oil production thanks to the shale boom. U.S. Gulf Coast crude oil is presently at a record high (207.2 million barrels) even without all the proposed Arctic drilling. Plus, according to the EIA this year's increase in production has been "particularly notable". This suggests the typical concerns associated with supply constraints can, "for now at least", be shelved. That may help take the allure out of investing in the refining sector this summer. 

>>Read More: 10 Most American-Made Cars of 2014

Further making me less inclined to get excited about the sector was a recent glaring comment by refining giant Valero (VLO). The industry bellwether last week said demand has simply not yet recovered from 2008 global recession. This further illustrates that the record stock market performance is not really indicative of the average Joe's spending power thanks to stagnant wage growth despite longer hours worked. This new reality (I know, I hate it too) may further crimp travel plans this summer and lessen demand for gasoline at the pump during the upcoming peak season. 

Valero also went so far as saying financially the refineries it owns in California are the is weakest group of assets. That's fascinating since there is market speculation that Valero could sell its San Francisco and Los Angeles refineries to Tom O'Malley's PBF Energy (PBF) a company that has expressed interest. The problem is if PBF is looking for growth, Valero's California assets may not be the answer. 

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,633.01 +276.14 1.59%
S&P 500 2,043.33 +30.44 1.51%
NASDAQ 4,716.3110 +71.9990 1.55%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs