Unless demand rebounds, shutting idle refineries and writing down their value could cause another hit to balance sheets. Many refiners managed to raise capital earlier this year, "but if the low-margin environment persists, they may need to tap the capital markets again," says Caris' Ann Kohler, who has Underperform ratings on refiners including Tesoro, Sunoco, Valero, Frontier Oil (FTO), Holly (HOC) and Western Refining (WNR). Although Valero boasts a strong balance sheet, Sankey contends that it has "just 10 more quarters, or 2.5 years, of liquidity available" unless its markets improve.

summer driving season

Value + chart + catalyst. Price of oil.

OIL....need I say more

Refinery

Keep an eye on the refiners, adds Pete Najarian. I love the action in Frontier (FTO) and Tesoro (TSO). Lower oil means input costs are less and margins at the refiners should improve.

The volume of options trading suggests to Pete that this stock could go higher. Specfically, he thinks margins could improve due to lower oil prices.

Magic Formula 081208

magic formula July 20 08

Najarian points out increasing options activity with both Boyd Gamiming (BYD) and Frontier Oil (FTO), and expects some type of action within the next six days.

tanking

Poor performance

Just don't see crack spreads holding up when GDP disappoints.