What a difference a month makes, last month traders were paying buyer to take their speculative deliveries, Monday, the benchmark pricing for WTI Crude Oil finished at 33.10, up almost 14% from Friday’s close and rose again Tuesday. Oil traders are focused down the road, with futures markets for both overseas-benchmark Brent and WTI bbls for Dec delivery having the highest open interest, or total number of options and outstanding contract. Remember, always take what the market gives.
Marathon Petroleum (NYSE:MPC), I have said this before and now again, is solid way for more conservative accounts to play the energy sector. Marathon Petroleum Corporation is 1 of the largest independent petroleum refining and marketing companies in the US. The company operates approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, Marathon Petroleum operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.
Despite a plan to spin-off Speedway, the company announced in late February it will invest $550-M in the chain. The investment will focus primarily on converting convenience stores the company added to its portfolio through several acquisitions over the past 2 years, notably, its strategic combination with San Antonio-based Andeavor in the Fall of Y 2018 to Speedway’s branding and systems.
Q-1 results were very solid and this is looking forward: The free cash flow is right sized to cover a sector leading dividend yield. While proposed as a response to C-19 coronavirus, the ongoing review may have longer term implications. Top refining pick: deep value with underappreciated cash flow capacity and refining leverage from an advantaged system.
Shareholders receive a 6.64% dividend, but this 1 may be pared. The BofA Securities price target is 56. The consensus target is 46.14, and Marathon Petroleum stock closed at 34.50, up 15% Monday.
I am staying with exploration and production companies and a refiner, avoiding oilfield services due to the continued potential for domestic and foreign production cuts and shut-ins.
The energy sector will remain volatile, but scale buying shares now and being patient should bring solid gains for conservative energy sector investors. With the country opening back up, and the busy Summer driving and vacation season here, demand looks to move substantially higher.
There is strong support at 32.09, and the Key resistance is at 59.91, a clear break over 36.94 augurs for a move back to the late February high at 60.56. My Key indicators are all flashing Very Bullish in here.
Have a healthy day, Keep the Faith!
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