November 16, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Western Refining (NYSE: WNR ) are down 12% today as refiners get socked by the market.
So what: Refiners are being hit hard today as oil surges higher. But what's worse in the long term for some refiners is that they won't be able to take advantage of a large spread between West Texas Intermediate, or WTI, oil prices versus Brent crude because of a pipeline reversal. When Enbridge (NYSE: ENB ) said it was buying 50% of the Seaway pipeline from ConocoPhillips (NYSE: COP ) , it also said it would reverse the pipeline's flow to ease supply in Cushing, Okla.
Now what: Refiners have used the spread in oil prices to enhance profits, so investors are speculating that the spread will come down and profits will fall. With oil on the rise anyway, I don't think that refiners are where I want to be right now. I don't see anything that makes me want to buy here and would avoid the sector in the face of rising costs.
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