Refining Our Outlook
The second golden age of refining appears to be winding down, especially for the inland refiners that flourished at the height of the shale revolution. The price spread between WTI and Brent has narrowed dramatically, erasing a huge competitive tailwind for US refiners. At this juncture, the potential downside risk outweighs any upside. Valuations and investor sentiment need to adjust to these realities. However, a painful first-quarter for refining operations, coupled with depressed oil and gas prices, could land shares of integrated oil and gas companies on the discount counter.
