Oil supplies are expected to continue to build within the U.S., and this will make the refining business more profitable this year, a Credit Suisse analyst said.
Edward Westlake said fields in Canada, North Dakota and Montana will grow supplies that feed mid-continent refineries owned by Western Refining Inc., Holly Corp., Delek US Holdings Inc. and Frontier Oil Corp. Westlake raised price targets for the group by 13 percent and pre-tax earnings estimates by 21 percent.
"We expect supply issues to continue for the rest of 2011," he said in a research note.
The industry is developing additional pipelines to move crude away from areas with heavy supplies, but that won't happen until 2013 or 2014, Westlake said.
Westlake set per-share price targets for Western Refining at $17, Holly Corp. at $64, Delek at $10.50, and Frontier at $28.
In morning trading, Western Refining shares rose 10 cents to $15.44 and Delek gained 27 cents, or 3 percent, to $9.40, while Frontier Oil fell 41 cents, or 1.7 percent, to $24.63 and Holly dropped 49 cents to $56.98.