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Large investors reduce stake in US refiners despite positive sector outlook

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Large investors reduce stake in US refiners despite positive sector outlook

Despite a positive outlook for the U.S. refining sector, large investors as a group reduced their net holdings in U.S. refining equities during the first quarter with net sellers outweighing net buyers, filings with the U.S. Securities and Exchange Commission show.

Beyond the tailwinds provided by U.S. tax reform and bullish refined product inventory levels, analysts say U.S. refiners stand to gain from widening crude oil spreads that are driven by infrastructure bottlenecks and growing U.S. crude oil production.

Experts also say U.S. refiners stand to benefit from tougher marine fuel sulfur standards that they expect will increase demand and prices for middle distillates of crude oil.

In reporting their first-quarter earnings, U.S. refining executives outlined the benefits they have seen from the Trump administration's lighter regulatory approach to biofuels.

The positive business environment has allowed U.S. refiners to build large reserves of cash and made them aggressive buyers of their own shares.

During conference calls discussing first-quarter earnings, both Delek US Holdings Inc. and Valero Energy Corp. emphasized they would use surplus cash to buy back shares.

And Phillips 66 executives reiterated their capital allocation strategy despite having surpassed their full-year guidance with a February repurchase of 35 million shares from Berkshire Hathaway Inc.

Data from 13F filings show that, excluding the Berkshire Hathaway deal, large investors were net sellers of Phillips 66 stock.

During the quarter, BlackRock Inc. reduced its stake in both Valero and Marathon Petroleum Corp. by a net 4 million shares, but retained sizable stakes in both companies.

At the same time, Janus Henderson Group PLC was a top-3 net acquirer of shares in Phillips 66, Valero, HollyFrontier Corp. and Andeavor.

Only Andeavor, which Marathon Petroleum announced April 30 it would acquire in a bid to become the largest U.S. refiner, saw holdings of its shares by large investors increase during the quarter.

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