Monday's news that Tesoro (NYSE:
) will pay about $2.5 billion for BP's (NYSE:
) Carson, California refinery and related assets is just the latest
sign refiners are back. On an anecdotal basis, the Tesoro/BP deal
highlights the vibrancy of the downstream business as Tesoro is
expanding its footprint in the California market.
Refining oil into gasoline is notoriously costly in California
due to the state's rigid environmental
that are rarely found in other states. Still, Tesoro opted to
expand its presence in the Golden State and even as oil prices
remain elevated by historical standards, shares of refiners have
surged in recent months.
"Roaring back" and "resurgent" are descriptors that may not do
the refining sector justice. In the past three months, Valero
) is the "laggard" a trio including HollyFrontier (NYSE:
). Over that time, Valero is almost 27 percent while HollyFrontier
is up nearly 33 percent. Tesoro easily trumps both with a surge of
Do not forget about Phillips 66 (NYSE: ). Separated from
ConocoPhillips (NYSE: ) earlier this year, Phillips 66 has gained
almost 23 percent since that separation, .
Investors obviously have multiple options when it comes to
refining stocks and for those looking to capture upside in several
refiners at once, there are some ETFs to help.
IndexIQ Global Oil Small Cap ETF (NYSE: ) The IndexIQ Global Oil
Small Cap ETF has a deceiving name because the fund is not
excessively weighted to speculative small-cap fare. However, IOIL
does devote 36 percent of its weight it refining and marketing
firms. That exposure to refiners is far in excess of what investors
will find with most other energy ETFs.
Tesoro and Sunoco (NYSE: ) combine for over 16 percent of IOIL's
weight. The two are the ETF's third- and fourth-largest holdings,
PowerShares Energy Exploration & Production Portfolio (NYSE:
) The PowerShares Energy Exploration & Production Portfolio is
another example of an ETF with a name that does not imply how
levered the fund actually is to the refiners' trade. PXE's roster
of 29 stocks includes five pure play refiners and a couple of other
stocks with downstream exposure.
Marathon Petroleum (NYSE: ), another refining spin-off is PXE's
top holding at six percent while Valero, Tesoro and HollyFrontier
combine for over 12 percent of the fund's weight. PXE has jumped
10.3 percent in the past month. A move to the $28 area would take
the ETF to its highest levels since April.
Rydex S&P Equal Weight Energy ETF (NYSE: ) No single stock
occupies a large percentage of RYE's weight and that is to be
expected with an equal weight product. What is surprising is that
RYE's top three holdings are refiners - Tesoro, Valero and Marathon
Petroleum. Sunoco is found further down RYE's lineup and the ETF's
roster includes enough exposure to integrated oil names to make
this fund a legitimate play on the refining renaissance. Despite
thin volume, RYE has gained 9.4 percent in the past month.
For more on energy ETFs, click .
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