In short: Terranova owns it personally (bought last July at $144) and won't sell (33:41). "They can't produce more diesel. They can't produce more gasoline. It's a supply shock." Russian refineries are down on Ukrainian attacks and US refiners are switching from gasoline to record-priced diesel, leaving gasoline tighter — "these are momentum energy plays, but there's a fundamental reason why I think you stay with these positions."
Refiners turn crude oil into gasoline, diesel and jet fuel, and they profit from the gap between crude and fuel prices. With Russian refineries damaged by Ukrainian attacks and diesel at a record, that gap is wide. Terranova's point is that this is a shortage of refining capacity, so a Fed rate hike can't fix it, and he is holding Valero (and likes Phillips 66 and Marathon) until it eases.
In short: Held in WEEI: the downstream refiner example ("companies that refine the oil").
15:53Williams is a good example that's in that portfolio. And then further downstream we have companies that refine the oil. Those are companies like Valero or MPC, the Marathon Petroleum. — Awesome. Yeah, it's really nice to have different avenues that you can invest in, or invest in all of them, but knowing that Westwood is so focused on this energy space is really comforting when it comes to feeling confident in your guys' approach and your guys' ability to really find the best companies for each of these
In short: "Even with Valero at $400 a share. It's very bullish for the likes of Valero." With diesel at $250/bbl, refiners' profits will be "absolutely enormous," a reward for sticking with refining "when everyone else gave up." The risks: an oil-product export ban (the stock traded off on that headline) or Washington going after "the cash pile." A DPA restart of its closed Benicia refinery is also being whispered.
Valero is one of the largest US oil refiners: it buys crude oil and turns it into gasoline, diesel and jet fuel. A refiner earns the gap between the crude it buys and the products it sells (the "crack spread"). Sankey says US diesel stocks are the lowest ever recorded, and diesel sells for about $250 a barrel while crude is near $110. That leaves a very wide margin, and Valero's plants are running almost flat out.
He calls it "very bullish" even with the shares around $400. The risk is political. With midterm elections coming and pump prices at records, Washington could ban exports of fuel, which would push US prices down and squeeze refiners, or otherwise go after their windfall. The stock already dipped on an export-ban headline. He thinks the energy officials and big oil companies close to the president are arguing against a ban.
29:16One of the conclusions is it is even with Valero at $400 a share. It's very bullish for the likes of Valero. The problem for those guys, they're going to make too much money and then it becomes the threat that somebody in Washington somehow gets their hands on the cash pile or bans exports or something stupid happens.
In short: One of the refiners at 52-week highs in Wapner's list, and the sub-sector Terranova stays with ("I think you stay with the refiners"). Belski: "the refiners are a great business" — his question to Lebenthal ("why no refiners for you?") is what produces the ExxonMobil-as-refiner answer, so the pure-plays are endorsed by two members and substituted for by the third.
In short: Joe Terranova's final trade, stated as a sector instruction rather than a stock pitch: "stay with the refiners, Valero." It is the single-name expression of the rotation map he laid out earlier in the hour — if the AI trade does not come back, the momentum factor "is going to continue to rotate more and more into energy, healthcare and financials… the same thing it did in 2022" — and it sits against a tape where oil and rising yields were named as the month's two headwinds from the first minute.
Valero is a refiner: it buys crude oil and turns it into gasoline, diesel and jet fuel. Refiners do not primarily make money from the oil price — they make it from the spread between what crude costs and what finished fuel sells for, which is why they can do well in exactly the environment (rising oil) that hurts most other businesses.
Terranova's final trade is a sector instruction — "stay with the refiners" — and it is the single-name expression of the map he drew earlier in the hour: if the AI trade does not restart, the momentum factor rotates into energy, healthcare and financials, exactly as it did in 2022. Naming a specific instrument for a factor call is what makes the call testable rather than decorative.
In short: The headline winner: "the winners would include U.S. refiners that process Venezuelan crude oil, like Valero Energy," and per energy research firm TPH Valero is "the top refiner of Venezuelan crude." Gulf Coast plants are built for heavy, sour barrels that "trade at a discount," so "the more Venezuelan crude they can purchase, the wider those margins are likely to get." Refiners rose Monday, "with Valero rising about 2%."
Valero doesn't pump oil — it buys crude and turns it into fuel, and it makes its money on the gap between what the crude costs and what the fuel sells for. Its Gulf Coast plants are built for the ugly stuff: thick, high-sulphur "heavy sour" crude that most refineries can't handle, and which therefore sells at a discount to clean, light oil. That discount is Valero's margin. The more heavy barrels there are looking for a home, the cheaper they get, and the wider its gap opens.
Venezuela's oil is exactly that grade, and half of it already comes to the U.S. Gulf Coast. Imports have gone from 137,000 barrels a day in January to roughly 700,000 by mid-July — before any deal. TPH says Valero refines more Venezuelan crude than anyone. So if the agreement eventually adds barrels, Valero is the most direct beneficiary; if it collapses, the trend that is already running doesn't stop. The stock's +2% on the day is a fair reflection: a real but incremental improvement to an already-excellent margin environment, not a transformation.
In short: Named first in the article's only equity sentence: refiners "like Valero and Marathon Petroleum are making very high margins on the fuel they sell amid elevated prices at the pump" — with the average gallon at $4.11, about $1 above a year ago because "oil and fuel supplies have been strained by the wars in Iran and Ukraine." The policy itself is refiner-friendly at the margin: the EPA is permitting a cheaper-to-produce winter blend (E10, more butane) two weeks early, which lets more volume clear — a relaxed constraint, not a windfall tax.
Gasoline is not one product. In summer the government requires a heavier, less evaporative blend because fumes in the heat make smog; in winter refiners are allowed to mix in cheap, volatile ingredients like butane. The winter recipe costs less to make and stretches further, so the same crude yields more sellable gallons.
The EPA has just let stations switch to that cheaper winter blend on Sept. 1 instead of mid-September. For drivers it is worth maybe 10 to 30 cents a gallon for a few weeks, against an average price of $4.11 that is a full dollar higher than a year ago. For a refiner like Valero it is the opposite of a crackdown — it is permission to sell a cheaper-to-produce fuel in greater volume.
The article's last line is the part that matters for the stock: refiners "like Valero and Marathon Petroleum are making very high margins on the fuel they sell." That is the same story as the record diesel margins three days earlier, and the political response to it so far is a blend waiver rather than anything that touches what refiners earn. The reason pump prices are high is the wars in Iran and Ukraine straining supply, and a change in fuel recipe does not fix a shortage.
In short: Still the trade, with an explicit positioning caveat. Terranova: "I've been talking Valero, Phillips 66. Well, the refiners see the best trades. You need to own the refiners, especially going into the fall." But he then applies his own sentiment discipline to his own call: "I always look at things from the standpoint of positioning and sentiment… they almost are beginning to look like the Micron type of memory trade at the end of June. Everyone's there already, everyone knows what we've been talking about. Look at positioning, look at sentiment — it is extremely bullish at this point." Not an exit ("doesn't mean you leave the energy trade at all"), but a rotation cue toward less-crowded energy exposure.
Valero is a pure refiner — it buys crude and sells gasoline and diesel — so it is the most direct way to own the record refining margins driving the energy rally. Terranova has been recommending it and still says you need to own the refiners going into the autumn.
What makes this entry unusually honest is that he then applies his own discipline against his own call. He tracks how crowded a trade is (positioning) and how uniformly bullish people sound about it (sentiment), and by both measures the refiners now look like Micron did at the end of June — right before that trade stopped working. "Everyone's there already. Everyone knows what we've been talking about."
That is not a sell. It is a warning that the easy part is behind, and a nudge toward energy exposure that is not yet crowded — which is why he names Devon and Diamondback in the same breath.
In short: Named first among "the biggest beneficiaries" of the record diesel crack — a U.S. refiner whose stock has reached an all-time high in the past few weeks. American refiners are earning record margins on diesel, triple the per-barrel profits of a year ago (OPIS), with the WTI-to-diesel spread at a record $101.86 — the first triple-digit print ever. Melius' James West: "we expect structurally higher refining margins over the next two years."
A refiner doesn't really sell oil — it buys crude, cooks it into diesel, gasoline and jet fuel, and sells those. So what it earns is the gap between what crude costs and what fuel sells for; the industry calls that gap the crack spread. Valero is one of the biggest U.S. refiners, which means its profits track that gap rather than the price of oil.
That gap has just done something it has never done before: the difference between U.S. crude and diesel futures hit $101.86, the first time it has ever reached three figures. American refiners are making roughly triple the profit per barrel they made this time last year. Valero's stock has hit an all-time high in the past few weeks, and Salzman names it first among the biggest beneficiaries.
Why this may persist rather than snap back: the shortage is on the refining side, and refining capacity takes years to add. Ukrainian drones have destroyed a chunk of Russia's refineries, Russia has restricted its own fuel exports into next year, China is keeping fuel at home, and Iran has closed the Strait of Hormuz. Meanwhile more refineries worldwide are closing than opening, and the next real wave of new plants isn't due until 2028–2030. The clean risk: this is a bet on a shortage, so peace deals in Iran and Ukraine — not a fall in the oil price — are what would end it.
In short: Lebenthal's one concrete instruction of the show: "I can encourage anyone to do one thing. It's buy a refiner. We're coming into hurricane season. I hope there's no hurricanes — what if in fact there is a hurricane? The disruption." Asked which: "I'll say Valero, but you could have Phillips 66… any of them." Refining is where he sees the industry's real bottleneck, and Terranova "has been a big one on the refiners — it's been the winning trade."
Valero turns crude oil into gasoline, diesel and jet fuel. Jim Lebenthal's one concrete instruction of the show was "buy a refiner," and asked to pick one he said Valero.
Two reasons. First, refining capacity — not oil production — is the real bottleneck in the US energy system, so refiners capture the spread between cheap crude and expensive fuel. Second, timing: hurricane season is starting, and when a storm knocks Gulf Coast refineries offline the fuel that surviving refineries produce becomes far more valuable. "I hope there's no hurricanes. What if in fact there is a hurricane? The disruption."
In short: The named refiner in the rate fight: Corpus doubled industrial water rates three years ago after years in which residents effectively subsidized big users, and several large users — Valero among them — are challenging that decision with state regulators. City Manager Peter Zanoni "did a double take" at Valero's blockbuster earnings report: "We're here worried about charging them a little bit more, and they're still fighting."
Corpus Christi discovered that its households had effectively been subsidizing industry's water for years, so the council doubled the industrial rate three years ago. Several large users, Valero among them, are contesting that increase before state regulators — while, as the city manager pointedly notes, posting blockbuster earnings. "We're here worried about charging them a little bit more, and they're still fighting."
The investment relevance is political, not per-barrel. Fighting a water-rate increase in the middle of a visible municipal water crisis, during a record profit run, is the kind of thing that hardens local sentiment and invites harsher treatment later — which for a refiner ultimately shows up as permitting friction and mandatory usage cuts rather than a line item. Refining margins are excellent; the local licence to operate is what is being spent down.
In short: His illustration that "there's always a bull market somewhere": with crack spreads near record highs (~$65/bbl) as refineries in the Gulf and Russia go offline, "this is good if you've owned refiners — look at the charts of Valero and Phillips 66, these things look like AI stocks." A refiner benefiting from the refined-product shortage.
Valero is a big oil refiner — it buys crude and turns it into diesel, gasoline and jet fuel. Refiners make money on the "crack spread," the gap between what crude costs and what the finished fuels sell for. Right now that spread is near record highs (~$65 a barrel) because refineries in the Gulf and Russia have been knocked offline and the world is short on refined products. Polomny's point: even with the crude price pushed down, refiners are booming — "there's always a bull market somewhere" — and Valero's chart "looks like an AI stock." He's flagging the setup rather than saying he just bought it.
29:59Here's the proof. Here's your crack spreads. $65 a barrel. That's telling you — this is I think some of the highest crack spreads ever. It's basically telling you, give us more crude. We need to refine more crude. But there's only a set amount of refineries. And if you start knocking them offline in the Gulf or in Russia, then again, the amount of refined products goes down in a global economy because diesel is fungible. And so customers that were getting it from those refineries have to get it somewhere else and there isn't enough. Get it? Now, this is good if you've owned refiners because look at the charts of Valero and Phillips 66. These things look like AI stocks. So again, that's why I say there's a bull market. There's always a bull market somewhere.
In short: His energy pick off the 52-week-high list — the leadership name to own in energy rather than fighting the rotation. "Want something on the 52-week-high list? Energy — Valero."
Valero is a big oil refiner (it turns crude into gasoline and diesel). It's Terranova's energy pick off the 52-week-high list. His point isn't a deep oil call — it's the leadership-screen discipline: even in a sector that feels "cold," own the specific name that's actually making new highs rather than fighting the tape.
In short: Reference — a US refiner that "popped beautifully" on the Venezuela barrels. Smead: he doesn't understand what changes overnight; if you own refineries you're more hedged (you want a wide diff) — the opposite of his long-oil-unhedged view. He'd be selling refineries here.
53:27Even US refineries like a Valero which has run nicely. — It's popped beautifully. I just I don't understand what that changes overnight. Um you know how many refineries on the US South are doing heavy oil? That's a good question for everyone to follow up on. How many pipelines could run that heavy oil in from Venezuela into the Midwest market, let's just say, and what would that pipeline cost? I mean, those are all real questions — and it's small.
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