U.S. refining shares soar on vaccine news, hopes for renewed fuel demand

Nov 9 (Reuters) - The U.S. refining sector soared on Monday after pharmaceutical company Pfizer said it had developed a vaccine that was more than 90% effective in preventing COVID-19.

Fuel demand has been hit hard by the coronavirus, which has killed more than a million people worldwide and infected 50 million. Shares of oil companies have been under pressure due to the pandemic, and the recent worldwide resurgence in COVID-19 cases is causing numerous countries to lock down again.

Shares of refiners PBF Energy and Valero were up more than 31% in midday trading on Monday, while Marathon Petroleum’s stock traded up 18% to $37.32.

Refiners are hinging their hopes on the speedy return in demand for products such as gasoline, jet fuel and diesel, according to comments made by executives on their third-quarter earnings calls.

“The problem was the product markets and especially the overhang of surplus jet fuel ... we believe that’s where the vaccine will be most effective,” said Manav Gupta, refining analyst at Credit Suisse.

If jet fuel demand can pick up, diesel inventory will draw and margins will stabilize, Gupta added.

However, energy consultancy Tudor, Pickering, Holt and Co said Monday’s rally in refining shares is likely “well overdone” given that the industry had been receiving positive news on vaccines throughout the fall.

“Did anyone really doubt we would not see a vaccine at some point?” Matthew Blair, another refining analyst, wrote in a note.

Blair noted that refining margins have barely moved on the news, with NYMEX gasoline crack spreads up 32 cents per barrel to $6.41, while diesel spreads were down 5 cents per barrel to $8.48.

“Even with a vaccine, we still face structural demand losses in gasoline and jet, with some people continuing to work from home, and Zoom calls replacing business trips,” Blair wrote. (Reporting by Laura Sanicola Editing by Paul Simao)