Trade update on Aussie Refiners
I wrote a note on the oil refining space at large and taking a small punt on the Aussie refiners two weeks ago - you can read it here A crack-up boom.
A few pieces of news have dropped in the past few days that relate to this trade…
The Australian government launches a feasibility study into a new refinery in Western Australia. This will be a laugh.
The refiners are seeking additional government subsidies to underwrite profitability if they are to stay operating and invest further into their operations. This is still being negotiated and the compromise of underwriting a certain level of profitability may be that ‘super profits’ are shared.
Both Ampol and Viva reported solid results albeit nothing that blew the lights out. Ampol’s refining margin of US$31/bbl for the quarter was far greater than Viva’s of US$20/bbl as the latter had a fire at its Geelong refinery in April which restricted its ability to produce some of the higher margin products like diesel.
Global crack spreads are still extremely elevated amid further damages to refining infrastructure continues to occur in both the Middle East and in Russia.
I think this trade still has legs but I am taking partial profits here. I can’t turn down a 20% return in a couple of weeks especially in this market environment. I’ll let the rest ride. This is NOT investment advice. DYODD etc.
Respeculator
**Disclaimer - this is NOT intended as financial advice - before acting on any information, you should consider the appropriateness of the information provided to your financial situation and seek advice. Whilst every effort is made to ensure the accuracy of data provided there’s a good chance inaccuracies exist. This is opinion only.**