Gas Prices Are Rising. Refiner Stocks Are Riding the Wave—for Now.

Refining capacity has fallen recently. Late last year, refineries were operating at 95% of capacity, extremely high for that time of year. But in the past few weeks, companies have been taking more refineries out of operation for maintenance. Now they’re operating at 85% capacity. With less fuel being sent to market, prices are rising again.

Demand is up, too. Gasoline exports have roughly doubled from a year ago, and China’s reopening means there are more people using fuel. Diesel is climbing toward 2022’s highs, with crack spreads—the margin between crude and diesel prices—hitting more than $60 this past week, from $50 in November and $25 a year ago. Diesel could rise more with Europe banning Russian oil products on Feb. 5.

Refiners began reporting earnings this past week. On Thursday,
Valero Energy
easily beat expectations. Its stock is up 23% year to date, versus the
VanEck Oil Refiners
exchange-traded fund’s 11.5%.

While earnings may dip in 2023, they’ll stay well above historical levels, says Leggate, who likes Valero,
PBF Energy,
and
Marathon Petroleum.
But it’s no sure thing that good times will last. More refineries will open globally in 2023 than in the past three. And a worldwide recession could ruin the party.

Next Week

Monday 1/30

Franklin Resources,

GE HealthCare Technologies,
and NXP Semiconductors report quarterly results.

Tuesday 1/31

Advanced Micro Devices,

Amgen,

Caterpillar,

Chubb,

Edwards Lifesciences,

Electronic Arts,
Exxon Mobil,
General Motors,

Marathon Petroleum,
McDonald’s,
Mondelez International,
Moody’s, MSCI,
Pfizer,

Phillips 66,

Stryker,

Sysco,
and
United Parcel Service
announce earnings.

The Institute for Supply Management releases the Chicago Business Barometer for January. Consensus estimate is for a 45.5 reading, roughly even with December. The index has had four consecutive readings below 50, indicating a contracting economy.

S&P CoreLogic releases the Case-Shiller National Home Price Index for November. Economists forecast a 7% year-over-year rise, compared with 9.2% increase previously.

Wednesday 2/1

Allstate,

Altria Group,

Boston Scientific,

Corteva,

GSK,

Johnson Controls International,

Humana,

Meta Platforms,

MetLife,

Novartis,

Novo Nordisk,

Old Dominion Freight Line,

Thermo Fisher Scientific,

T-Mobile US,
and Waste Management release quarterly results.

The Federal Open Market Committee announces its monetary-policy decision. The central bank is widely expected to raise the federal-funds rate by 25 basis points to 4.5%-4.75%. Wall Street is eager to hear from Fed Chairman Jerome Powell and glean any hints as to when the FOMC might pause its interest-rate hiking campaign.

ADP releases its National Employment Report for January. Expectations are for the economy to add 170,000 jobs after an increase of 235,000 in December.

The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. The consensus call is for 10.3 million job openings on the last business day of December, 158,000 fewer than in November.

Thursday 2/2

Big Tech headlines a big day for earnings. Three of the four largest U.S. companies by market value,
Alphabet,

Amazon.com,
and
Apple,
all release results after the market close.

Becton Dickinson,

Bristol Myers Squibb,

ConocoPhillips,

Eli Lilly,

Estée Lauder,

Ford Motor,

Gilead Sciences,
Hershey,
Honeywell International,

Intercontinental Exchange,
Merck,
Qualcomm,

Shell,
and
Starbucks
hold conference calls to discuss earnings.

Friday 2/3

Aon,

Cboe Global Markets,

Cigna,

LyondellBasell Industries,

Regeneron Pharmaceuticals,
and Sanofi report quarterly results.

The BLS releases the jobs report for January. Economists forecast a 190,000 increase in nonfarm payrolls, after a 223,000 gain in December. The unemployment rate is expected to edge up to 3.6% from 3.5%.

Write to Avi Salzman at avi.salzman@barrons.com