Here is a positive article for VLO.
Gasoline Inventories Fell More than Analysts Expected
Market Realist By Manu Milan
October 19, 2015 8:26 AM
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Refinery Outage Could Increase Gasoline Prices
Gasoline inventories
The EIA (US Energy Information Administration), in its weekly Petroleum Status Report released on October 15, states that US gasoline inventories fell by 2.6 MMbbls (million barrels) to 221.3 MMbbls in the week ending October 9. Moreover, the American Petroleum Institute released a report on October 14, stating that gasoline supplies fell by 5.0 million barrels. Analysts had expected inventories to fall by 1.65 MMbbls.
Petroleum Administration Districts
According to the EIA report, gasoline inventories in PADD’s (Petroleum Administration for Defense Districts) for the week ending October 9 were as follows:
gasoline inventories in the East Coast region, or PADD 1, slightly rose from 63.2 MMbbls to 63.5 MMbbls
inventory levels in the Midwest region, or PADD 2, were the same, at 46.8 MMbbls
inventory levels in the Gulf Coast region, or PADD 3, fell from 76.9 MMbbls to 74.7 MMbbls
inventory levels in the Rocky Mountain region, or PADD 4, slightly fell from 7.2 MMbbls to 7.0 MMbbls
inventory levels in the West Coast region, or PADD5, saw a slight fall of 0.7 MMbbls and settled at 29.2 MMbbls
Why investors track gasoline inventory data?
Gasoline is one of the important sources of energy used for transportation and inventory levels drive the price of gasoline. Gasoline is produced from crude oil, so the price of gasoline and the price of crude oil are correlated with each other. Hence, investors tend to take a close look at gasoline inventories.
Who gains?
A fall in gasoline inventories that is more than analysts expected could be bullish for gasoline prices. On the other hand, a rise in prices could bring in more revenue for refiners such as Tesoro (TSO), Phillips 66 (PSX), and Valero Energy (VLO). Phillips 66 accounts for 3.2% of the Vanguard Energy ETF’s (VDE) portfolio.
Refiners’ margins are determined by crude oil prices, or USO. A low price for crude oil could reduce the cost of operating for refiners so that more profits could be expected. On the other hand, a higher gasoline price could benefit logistics companies, like Tesoro Logistics (TLLP) and Phillips 66 Partners (PSXP), through a greater volume of gasoline transports.
Gasoline production
Gasoline production rose from ~9.31 MMbpd (million barrels per day) in the week ended October 2, to ~9.62 MMbpd in the week ended October 9. Average gasoline production for the last four weeks was ~9.54 MMbpd for the week ended October 9. That was 1.05% more than the ~9.08 MMbpd average over the corresponding period last year for the week ending October 10, 2014.
U.S. Gasoline Demand 2015-10-16
Enlarge Graph
Gasoline demand
Gasoline demand rose by ~0.18 MMbpd for the week ending October 9. The 8.96 MMbpd in demand in the week ended October 2 rose to 9.137 MMbpd in the week ended October 9. Gasoline demand averaged 9.08 MMbpd over the last four weeks for the week ending October 9. This was ~1% more than the corresponding period last year. In other words, demand was 8.78 MMbpd for the week ending October 10, 2014.
What do demand and production levels imply?
From the above production and demand data, we can notice that production and demand levels seem to be matching each other. Matching production and demand levels build up inventory, but this isn’t the case now as gasoline inventories have fallen, so net trade flows could be the reason for the fall in inventory levels.
Impact on refiners
Rising gasoline consumption and production are potentially bullish for gasoline prices. This could elevate the margins for the refiners such as Marathon Petroleum (MPC), Valero Energy (VLO), Hess Corporation (HES), and Tesoro Corporation (TSO). These companies make up 8.52% of the Vanguard Energy ETF (VDE).
Rising consumption levels could also be positive for midstream MLPs such as Phillips 66 Partners (PSXP) and MPLX LP (MPLX) by increasing the volume of transportation. This could lead to a rise in revenues for these logistic players.
Gasoline production
Gasoline production rose from ~9.31 MMbpd (million barrels per day) in the week ended October 2, to ~9.62 MMbpd in the week ended October 9. Average gasoline production for the last four weeks was ~9.54 MMbpd for the week ended October 9. That was 1.05% more than the ~9.08 MMbpd average over the corresponding period last year for the week ending October 10, 2014.
U.S. Gasoline Demand 2015-10-16
Enlarge Graph
Gasoline demand
Gasoline demand rose by ~0.18 MMbpd for the week ending October 9. The 8.96 MMbpd in demand in the week ended October 2 rose to 9.137 MMbpd in the week ended October 9. Gasoline demand averaged 9.08 MMbpd over the last four weeks for the week ending October 9. This was ~1% more than the corresponding period last year. In other words, demand was 8.78 MMbpd for the week ending October 10, 2014.
What do demand and production levels imply?
From the above production and demand data, we can notice that production and demand levels seem to be matching each other. Matching production and demand levels build up inventory, but this isn’t the case now as gasoline inventories have fallen, so net trade flows could be the reason for the fall in inventory levels.
Impact on refiners
Rising gasoline consumption and production are potentially bullish for gasoline prices. This could elevate the margins for the refiners such as Marathon Petroleum (MPC), Valero Energy (VLO), Hess Corporation (HES), and Tesoro Corporation (TSO). These companies make up 8.52% of the Vanguard Energy ETF (VDE).
Rising consumption levels could also be positive for midstream MLPs such as Phillips 66 Partners (PSXP) and MPLX LP (MPLX) by increasing the volume of transportation. This could lead to a rise in revenues for these logistic players.
