NEW YORK (TheStreet) -- I was talking to Jim Cramer today about the latest moves in the oil market. This summer, the most important one seems to be the rise in the price of West Texas Intermediate crude, at least in relation to the price of Brent crude, the global benchmark. This continues to be very bad news for the refiners and the refining sector
I made a strong call two weeks ago that the price difference between these two benchmarks of crude would begin to shrink and ultimately disappear. Slowly but surely this is beginning to happen, and the WTI/Brent spread is in now close to $5.
The major reason this spread has reversed is the relatively small ruling of the U.S. Commerce Department allowing the export of lightly distilled condensate from Pioneer Natural Resources (PXD - Get Report) and Enterprise Product Partners (EPD - Get Report) . This ruling not only opens the door for more special dispensations to export crude oil but perhaps a full-on end of the export ban of domestically produced crude oil.
An end to the export ban would also end the massive margin advantage the U.S. refining sector has enjoyed for the last five years, in essence buying cheaper WTI crude and selling refined gasoline using the higher Brent benchmark to price refined products. It was that advantage that has spurred many of the refiners to increase three- and four-fold in the last four years. Once that margin advantage is gone, the refinery stocks will have to again revert to a more marginal valuation. That process has just begun.
I talk more about the refiners and the WTI/Brent spread with Jim in the video above.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates PIONEER NATURAL RESOURCES CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate PIONEER NATURAL RESOURCES CO (PXD) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share." You can view the full analysis from the report here: PXD Ratings Report