Gasoline inventories fell against high demand last week as the summer travel season wanes and Labor Day, the last big hurrah for American road trips, falls at the latest possible date. Inventories declined by 3 million barrels.

H. Rousseau of Soleil Securities and Back Bay research warns that “high
gasoline demand is unlikely to continue for much longer, in our view,
since consumption typically falls sharply in September (vs. August).”

Says Linda Rafield, a senior analyst with Platts: “Refiner demand for
crude barrels climbed 468,000 barrels per day to 14.951 million barrels
per day, the highest level in nearly two months.”

Refiners have responded to the drop in inventories by ramping up for
more production, which should come on line within the coming weeks.
Increased production and a pullback in demand should keep gas prices
from spiking. Gasoline inventories are 3% above their five-year moving
average — another drag on prices.

Refining margins are falling as well. Soleil estimates that margins
dropped from $10.63 a barrel to $9.18 this week. The 2009 average has
been $10.51 a barrel, compared with $18 a barrel in 2007 and $12 a
barrel in 2008.

Overall oil demand is still down by 1 million barrels a day to 19.3
million says Platts. Crude stocks fell a bit to 344 million barrels
with U.S. commercial crude stocks at 30 million barrels — well above
the five-year average and stockpiles from a year ago.

Soleil has “buy” ratings on Holly Corp., which trades at 5.6 times 2010
earnings; Sunoco at 6.2 times 2010 earnings; Valero Energy at 7 times
2010 earnings; and Western Refining at 8.5 times 2010 earnings.

On a 2009 earnings basis, Western is the bargain of the bunch at 7.8
times earnings. The most expensive is Tesoro Corp. at 142 times 2009
earnings. Along with Frontier oil at 36 times 2009 earnings, Soleil has
a “hold” rating on Tesoro.

Source: Forbes

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