Refiners including Tesoro Corp. (TSO:US) and Valero Energy Corp. (VLO:US) fell on speculation by Deutsche Bank that a win by Republican presidential candidate Mitt Romney may threaten restrictions on U.S. crude exports.
Tesoro fell 4.5 percent to $36.42 at the close in New York, and Valero dropped 3.8 percent to $28.36. Tesoro has risen 56 percent this year, and Valero is up 35 percent.
“We believe a Mitt Romney election win -- broadly supported by the refining industry -- could in fact threaten the crude export ban,” Paul Sankey, a Deutsche Bank energy analyst based in New York, wrote today in a note to investors.
The U.S. has restricted exports of crude oil since the 1970s. Eliminating the ban would allow U.S. producers to seek higher prices for their crude and limit the ability of refiners to buy cheaper oil to feed their plants, slowing a rally that has put some refiners on a pace to double profits this year compared to 2011, according to data compiled by Bloomberg.
The bank’s speculation about Romney stems from “assuming his chief energy advisor, Harold Hamm, CEO of Bakken play Continental Resources (CLR:US), would support de-regulation,” Sankey said.
U.S. refining margins have fallen 29 percent since Oct. 5 as pipeline projects to ship crude from areas with new U.S. production in the Midwest and Great Plains approach completion, according to data compiled by Bloomberg.
The projects include an effort by Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD:US) to double capacity on the Seaway pipeline and Magellan Midstream Partners LP (MMP:US)’s reversal of the Longhorn pipeline from West Texas to Houston.
The new pipelines will cause the price of West Texas Intermediate crude, the U.S. benchmark, to rise relative to Brent, narrowing the cost advantage that has been at the root of the refining rally, Sankey said.
The spread, or difference, between WTI and Brent widened 4 percent to $21.63 a barrel today at 12:08 p.m. in New York, a price that’s 38 percent higher than the $15.69 average price in 2011, according to data compiled by Bloomberg. The 2011 average was an all-time high.
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