Crack Spread to Soar: Add MPC, XOM and PSX to Your Watchlist

Core Insights - U.S. gasoline inventories have dropped to their lowest levels in two years due to strong demand and tighter fuel supplies, with a reported 6% increase in gasoline demand for the week ending Nov. 8 [1] - The EIA's November 2024 short-term Energy outlook forecasts a moderate increase in crack spreads, indicating higher refining margins driven by shrinking refinery capacity and planned closures of major U.S. refineries [2] - Rising U.S. demand for gasoline and diesel, driven by industrial activity and transportation needs, is expected to outpace reduced refinery output, further elevating crack spreads [3] - Global refinery additions are not sufficient to offset U.S. refinery closures, leading to continued upward pressure on domestic refining margins [4] Company Insights - Phillips 66 operates nine refineries in the U.S. and two in Europe, with a daily crude processing capacity of 1.8 million barrels, focusing on financial stability and maximizing shareholder returns [6] - Marathon Petroleum has 13 refineries with a total refining capacity of 3 million barrels per day, optimizing processing to produce higher-margin products [7] - ExxonMobil operates one of the largest refining businesses globally, with 21 refineries and a distillation capacity of nearly 5 million barrels per day, selling over 5.4 million barrels of petroleum products daily [8][9] Investment Opportunities - Companies like Phillips 66, Marathon Petroleum, and ExxonMobil are expected to benefit from widening crack spreads, translating to greater profitability in refining operations [5]