S&P Touts One ETF For Exposure To Refiners

Oil refiners posted strong third-quarter results and Standard & Poor's Capital IQ expects the good times to keep rolling for the sector through the end of this year and into 2012. And while there isn't an exchange-traded product devoted exclusively to refiners, S&P did have some positive comments on the PowerShares Dynamic Energy Exploration & Production ETF PXE. The research firm rates PXE “marketweight,” but the ETF is home to Exxon Mobil XOM, Chevron XOM and HollyFrontier HFC, all of which receive five-star ratings from S&P. PXE also holds ConocoPhillips COP and Valero VLO, which S&P rates with four stars. “Although macroeconomic challenges exist for refiners, we believe that the catalysts that drove earnings growth in the third quarter will continue into 2012. Our fundamental outlook for the oil & gas refining & marketing sub-industry for the next 12 months is positive,” S&P analyst Tanjila Shafi said in a note. PXE is also home to Marathon Oil MRO, which spun-off is downstream business earlier this year. ConocoPhillips is planning to do the same early next year and that could mean some additions to PXE in terms of refiners. Home to 30 stocks, PXE has an expense ratio 0.63% and over $76 million in assets under management. “We believe that several potential catalysts will drive earnings growth in 2012. In our view, refiners will benefit from their ability to source discounted crudes and their operational flexibility. We see WTI continuing to trade at discounted levels. The differential is currently at $19 per barrel, after reaching a high of $29 per barrel in mid-October and we believe that the differential will trade between $15 per barrel to $20 per barrel in 2012, given the increasing production coming from U.S. shale plays and Canadian oil sands,” Shafi said. In addition to PXE, investors looking for refining exposure through an ETF could take a look at the IndexIQ Global Oil Small Cap Equity ETF IOIL. IOIL made its debut in May and also offers exposure to HollyFrontier along with Tesoro TSO among other refiners.