June
17, 2002; Refining Margin Futures Reestablish a Positive Trend
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For the second week ended Thursday, one-year futures for the 3-2-1 crack spread in New York harbor are in an up trend defined as being above the 30 week average. Though there is no assurance the new trend will be sustained, we are sure that better days for refiners lie ahead eventually.
Moreover New York harbor market conditions may
understate prospects in Marathon’s Midwest markets. No well-known commodity exchange reports one-year futures for
any other market to our knowledge.
The source of our data is wsj.com that relays a
smoothed strip of New York Mercantile Exchange prices.
Not all futures months trade every day and the smoothed strip is
approximated from those contracts that have traded recently.
Using prices for twelve future months neutralizes seasonal influences.
Subject to all those qualifications about the data,
the interpretation also must be qualified.
We are not surprised that stock prices are often weaker when the
commodity price trend is less favorable. Yet
we maintained our recommendation for the stocks.
Now we are hopeful the commodity trend stays positive and that stock
prices will firm up accordingly.
Price charts are no substitute for fundamental
analysis, but can add color to fundamental conviction.