KTBST Gives Positive View on Refinery Sector as US’ Largest Oil Pipeline Comes to a Halt
KTBST had a positive view toward the refinery group, especially TOP and SPRC, after the largest U.S. oil pipeline company halted the operation.
KTBST Securities (KTBST) has a positive outlook on the refinery stocks, following Colonial Pipeline, the largest oil pipeline company in the U.S., halted its operations temporarily after it reported a cyberattack from a ransomware group known as DarkSide.
Colonial is the main oil supplier in the U.S. East, accounting for 45% of the total eastern fuel supply), with the capacity to ship 2.5 million barrels per day (mbd) from Houston to the east coast and another 0.9 mbd goes to New York with Colonial being the primary supplier of gasoline, diesel and jet fuel.
KTBST has a positive view on the refinery group regarding the halt, believing that although the interruption of the pipeline may be temporary, it may result in U.S. refineries to cut their production capacity and increase the crack spread of gasoline, diesel and jet fuel in the short -term.
These products’ crack spread originally increased QoQ and QTD in 2Q21 with gasoline crack at USD11.1/bbl, up from USD7.1/bbl in 1Q21, which was a positive driving season in the US. Meanwhile, diesel crack increased to USD4.8/bbl from USD4.7/bbl. Jet fuel crack rose to USD3.8/bbl from USD3.3/bbl on the back of higher oil demand after the global vaccine rollout.
In addition, KTBST maintained “Overweight” outlook on the energy sector and liked the recovery direction in the refinery sector. The security company recommended “BUY” on TOP at Bt70.00 and SPRC at Bt10.50 per share. KTBST believed SPRC to benefit the most from the halt due to having the largest market share in producing gasoline among its peers.