Oct 15 (Reuters) - Morgan Stanley started coverage of U.S. refiners with an “in-line” view, saying that drawing down of distillate inventories due to cold weather, tightening of excess capacity and economic recovery will combine to improve crack spreads, but the recovery will be long and slow.
Crack spread - the measure of how much refiners net from turning crude oil into fuels like gasoline - have remained suppressed due to weak demand for refined products amid the global downturn and increased capacity.
“We expect 2009 to mark the trough in US gross refining margins, followed by a slow recovery extending into 2013,” the brokerage said.
The brokerage believes that refining stocks will trade higher in the near term, despite likely challenging third- and fourth-quarter results.
Morgan Stanley said “overweight”-rated Sunoco Inc (SUN.N) is its top pick as it expects the company to gain from greater exposure to non-refining and shorter-cycle businesses.
Shares of Sunoco rose as much as 9 percent before paring some gains to trade up $2.46 at $32.25 Thursday afternoon on the New York Stock Exchange.
For alerts on the story double click [ID:nWNAB9536] (Reporting by Krishna N. Das in Bangalore; Editing by Deepak Kannan)