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Energy prices were strong on Monday… spot crude oil in New York ticked ever so closer to $80, while oil in London took out last summer’s 77.71 high print. Meantime, natural gas futures in New York faded initial weakness, but then rallied hard. Thus, at this point there is no real point in stepping in front of the NYMEX/ICE freight train.
Last Thursday, analysts at Morgan Stanley named Sunoco [ SUN 29.79 
-0.52 (-1.72%) ] as their top pick in the refining industry, leading shares to shoot up 9.5% to $32.61 by Friday.
Their analysis must have come as a surprise to the analysts at Moody’s who lowered Sunoco’s rating on October 7th from “Stable” to “Negative”, not to mention the 400 workers recently furloughed at Sunoco’s Eagle Point refinery in New Jersey after the company idled the facility there indefinitely.
Regardless, major refiners felt the knock on goodwill, with Valero Energy [ VLO 20.31 -0.24 (-1.17%) ] rising 7% and Tesoro Corp. [ TSO 13.84 -0.31 (-2.19%) ] rising 8.6%.
Moving beyond the equities markets, does Morgan Stanley’s analysis imply that crack margins will improve, leading to better returns for refiners?
Or is a buy signal on Sunoco simply due to better cash management and balance sheet magic, exemplified by shutting in their NJ refinery?
According to Bloomberg’s article,
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