U.S.refining stocks have been notching up healthy gains on the news that Japan’s strongest earthquake in over 140 years forced local refiners to shut processing plants. The 9.0-magnitude tremor – which unleashed a colossal 30-foot Tsunami in the country’s northeast coast that killed hundreds of people and caused massive carnage and destruction – has significantly pared Japanese refining capacity.
According to media reports, the earthquake/tsunami disaster have led to five of Japan’s refineries (with a combine processing capacity of 1.2 million barrels a day) to go off, while almost a dozen nuclear plants (another major source of electricity in Japan) have been shut down. It is being said that roughly 18% of Japan’s oil refining capacities have been thrown offline due to the earthquake, causing millions of buildings in the country to go without power.
The loss of refining infrastructure/nuclear power simply means that Japan will need to fulfill demand one way or another and may have to turn to outside energy firms to import vast amounts of refined crude and other energy sources, until their domestic refiners are back online.
As a result, while crude prices have dropped below $100 a barrel following apprehensions that demand from the ‘Land of the Rising Sun’ – the world’s third-largest oil-consuming country – could temporarily be lower, U.S. oil refiner stocks have soared since Friday morning trading. At Monday’s closing stock prices, Tesoro Corp. (TSO) is up 15% since Thursday, March 10, Valero Energy Corp. (VLO) shares have spiked 10%, whereas Western Refining Inc. (WNR) have surged 13%.
Valero and Western Refining both retain a Zacks #2 Rank (short-term ‘Buy’ rating), while Tesoro has a Zacks #3 Rank (short-term ‘Hold’ rating)