In a prior note (U.S. Oil Production and Capex Expected to Rise, June 20, 2022), we look at the energy industry from a production and capital expenditure perspective.  U.S. President Joe Biden has called upon the industry to increase both oil production and refining capacity. In this note, we focus on the latter as refineries play a key role in the lifecycle of a barrel of oil by converting it into refined products including gasoline, diesel, and jet fuel. Exhibit 1 highlights the U.S. refining system at an aggregate level.  As of May 2022, refining capacity stands at 17.9 million

In this ‘Product Insight’, we look at how correlation coefficients can potentially ‘break down’ during periods of extreme volatility. Refinitiv Datastream allows users to users to access a library of ‘functions’ which provide cloud-based calculations that are delivered instantly into either excel or charting environments.  A library of approximately 85 functions span across categories including logical, mathematical, statistical, and technical to name a few. For correlation, we need to use the CORR# function: CORR#(Variable1,Variable2,Period/frequency). While straightforward to use within the product, interpreting the end output can be challenging depending on the inputs used.  Certain considerations a user must consider include:

Commodities have been at the forefront of global markets for over a year now given its meteoric rise and its key role in supply chains during times of extreme market turmoil. The Refinitiv/Core Commodity CRB® has significantly outperformed global equities in 2021 and 2022, up 38.5% and 26.7% respectively vs. 16.1% and -11.1% for global equities.  The last time commodities outperformed global equities in a consecutive two-year period where returns were positive for both asset classes were back in 2004-2005. The Refinitiv/Core Commodity CRB® Index represents 19 commodities grouped into four major category weights including Energy (39%), Agriculture (34%), Metals

Oil refineries finished reporting 20Q1 earnings, posting positive earnings surprise across the board. Valero Energy posted the largest positive surprise with an actual result of $0.34 compared to consensus of $-0.15 as seen in Exhibit 1. Exhibit 1: S&P500 20EQ1 Earnings Result for Oil Refiners While oil refiners beat Wall Street expectations, the outlook for growth remains very challenged. According to I/B/E/S data from Refinitiv, year-over-year earnings growth for the oil & gas refining & marketing sub-industry for 20Q1-20Q4 are expected to be 66.8%, -138.8%, -98.0%, and -94.6% in each quarter, respectively. Similarly, year-over-year revenue growth for the sub-industry for

The Oil & Gas Equipment & Services sub-industry kicked off 20Q1 earnings season for the S&P 500 Energy sector. Unsurprisingly, 2020 earnings and revenue growth for the entire energy sector will be dismal given the dual shock of a collapse in demand and resulting oversupply.  According to I/B/E/S data from Refinitiv, year-over-year earnings growth for the energy sector for 20Q1-20Q4 are expected to be -68.0%, -148.7%, -119.9%, and -101.6% in each quarter, respectively. Similarly, year-over-year revenue growth for the energy sector for 20Q1-20Q4 is forecasted at -14.6%, -38.7%, -28.3%, and -20.4% in each quarter, respectively. Exhibit 1: 20Q1 Results for

On Sept. 14, Saudi Arabia’s crown jewel was under attack.  Eighteen drones and seven cruise missiles were on path to target prized locations including the world’s largest oil processing facility in Abqaiq and the second largest oilfield at Khuaris.  Both locations are owned by Saudi Aramco (state-owned as of now), which is the world’s most profitable company. The result was devastating.  Key infrastructure was deeply damaged, and reports indicated that production of up to 5.7 million barrels of oil per day were impacted.  To put this in perspective, this is equivalent to 5% of global oil production and 50% of