Energy Business

Lowest Gas Prices in 7 Years Could Boost Oil: 3 Refiners to Buy Right Now

Consumers would have to be living on another planet to not notice how cheap it has become to fill up the car, truck or sport utility vehicle, and with spring and summer right around the corner, Americans are expected to be driving record miles this year. That gasoline usage, combined with the huge decline in active wells and capital expenditures, could drive benchmark West Texas Intermediate (WTI) crude back to $45 this summer.

In a new research report, Merrill Lynch analysts feel that the battering in the refining stocks is close to over, and they even use a baseball term by saying the firm’s negative refining call is in the seventh inning. Led by the firm’s well-respected energy analyst Doug Leggate, Merrill Lynch has positioned its top refining picks with seasonal momentum in mind, and the firm favors mid-continent refiners. In addition, another top large cap name makes the cut and has seen massive insider buying by Warren Buffett.


This small cap refining company could bring some outstanding gains for investors with a more aggressive investing portfolio. Delek U.S. Holdings Inc. (NYSE: DK) is a diversified downstream energy company with assets in petroleum refining, logistics and convenience store retailing. The refining segment consists of refineries operated in Tyler, Texas, and El Dorado, Ark., with a combined nameplate production capacity of 155,000 barrels per day.

The company’s retail segment markets motor fuel and convenience merchandise through a network of approximately 355 company-operated convenience store locations operated under the MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart brand names. Delek also owns approximately 48% of the outstanding common stock of independent refiner Alon USA Energy.

Delek is expected to report earnings this week, and the Merrill Lynch analysts like that the company operates in geographic areas of the country that they feel are “product short.”

Delek investors are paid a very rich 4.42% dividend. Merrill Lynch has a whopping $32 price target on the stock, and the Thomson/First Call consensus target price is posted at $29.62. The stock closed on Monday at $13.58 a share.