DOE Surprise... Refineries Coming Back (OIH, USO, VLO, SUN, HES)

If you have followed the oil patch, the news from the refining sector has been abominable.  Overall, we have seen many weeks where the United States refining capacity was not even running at 80%.  This morning we saw some Department of Energy data on the weekly inventories.  The supply had some mixed data, but there is starting to look like a ray of sunshine in the refining capacity with another higher gain in the last week.

Normally the key ETFs of Oil Services HOLDRs (NYSE: OIH) and the United States Oil (NYSE: USO) ETF are the ones to watch.  But the big move is in Valero Energy Corp. (NYSE: VLO), Sunoco Inc. (NYSE: SUN), and then in Hess Corporation (NYSE: HES).

Crude oil saw a build of a whopping 7.24 million barrels to 351.26 million barrels.  Dow Jones had expected 1.4 million barrels, and we were only braced for a build of 2 million at most.

The conflict is in gasoline… inventories fell there by 2.715 million barrels, far worse than a Dow Jones estimate of -1.3 million barrels and even worse than our own benchmark for a drop of only about 500,000 barrels.

The big refineries capacity was 81.1%.  Dow Jones had estimates of 80.6%, which is what the reading was just a week ago.

The Oil Services HOLDRs (NYSE: OIH) is up 0.26% at $121.35 and United States Oil (NYSE: USO) is down 1.5% at $39.10.  Valero Energy Corp. (NYSE: VLO) is now up almost 2% at $20.67 after having been negative before the news, Sunoco Inc. (NYSE: SUN) is now up 0.5% at $30.29 after being negative this morning, and then in Hess Corporation (NYSE: HES) is now up 0.3% at $61.63 after being negative before the report.

Valero’s 52-week trading range is $15.29 to $23.62.

Stay tuned!  Refining has been such a drag for so long that it has acted as an anchor weighing down on earnings from even the largest fully integrated oil companies in the world.  The last time we were above 81% in refining capacity was three-weeks ago and it was just about five weeks ago in February and earlier in January when US refineries were running under 80%.

JON C. OGG