Refiners' Shares Rise as Storm Approaches U.S. Gulf

By Jordan Burke

Aug. 27 (Bloomberg) -- Independent oil refiners, including Tesoro Corp. and Sunoco Inc., rose as fuel margins widened with the approach of Tropical Storm Gustav to the Gulf of Mexico.

Gustav, which drenched Haiti today, threatened to disrupt energy output in the Gulf and refineries along the Gulf Coast, which account for about 41 percent of U.S. oil-processing capacity. Refineries along the coast produce about 2.36 million barrels of gasoline a day, or 28 percent of the nation's supply.

The storm, which weakened from a hurricane overnight as it passed over Haiti, is forecast to regain steam over the Caribbean and may intensify into a Category 3 hurricane or stronger as it enters the Gulf by Aug. 31, according to the National Hurricane Center in Miami.

Gustav may benefit refiners with plants outside the Gulf region, which can capitalize on the wider margins without a threat to their operations from the storm.

Tesoro, based in San Antonio, soared $1.84, or 11 percent, to $18.41 in New York Stock Exchange composite trading. The company's seven refineries are located in Alaska, Hawaii and the western U.S.

Philadelphia-based Sunoco rose $1.97, or 4.9 percent, to $42.33. Sunoco's five refineries, which are mostly located in the U.S. Northeast, have a combined daily processing capacity of about 903,000 barrels of feedstocks, according to Energy Department data.

Frontier, Valero

Frontier Oil Corp., based in Houston, jumped $2.09, or 12 percent, to $19.41. Frontier operates a refinery in Kansas and one in Wyoming.

San Antonio-based Valero Energy Corp., the largest U.S. refiner, rose $1.42, or 4.2 percent, to $35.02. Seven of Valero's 16 plants are located along the Gulf Coast.

The margin for processing three barrels of crude oil into two barrels of gasoline and one barrel of heating oil widened 6.4 percent to $9.66 a barrel today, based on New York futures prices. The margin widened as fuel prices rose faster than crude with the approach of Gustav.

Gustav may become the strongest storm to reach the Gulf since 2005, when hurricanes Katrina and Rita shut refineries and platforms, AccuWeather.com said on its Web site. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.

The storm was about 90 miles (145 kilometers) southeast of Guantanamo, Cuba, at about 5 p.m. Miami time, the hurricane center said in an advisory.

Independent refiners are fuel processors that don't also produce crude oil.

To contact the reporter on this story: Jordan Burke in New York at jburke29@bloomberg.net.