There is one sector of the equity market that may be a clear beneficiary from the recent large decline in the price of crude oil, oil refiners. Refiners are entering their most bullish time of the year historically (November through March) and refining margins (crack spreads) are widening:

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Refiner_Seasonality

Refining_Margins

 

During the past two weeks Gasoline has held up relatively well compared to the drop in crude prices:

Oil_vs._Gas

Technically speaking many of the refiners are showing signs that they are ready for a pullback, we would look to be buyers on a further 3-4% pullback near many of these stocks' 50-day simple moving averages (blue line):

ALDW

 

CVVR

 

TSO

 

VLO

 

WNR

VLO is our top pick in the oil refining space primarily due to the company's ability to process low-grade Canadian oil sands which could become a major catalyst after a Republican win in the US Senate elections this evening. Republican control of the House and Senate would put President Obama under a great deal of pressure to make a deal on the Keystone XL Pipeline which would take as much as 830,000 barrels per day of Alberta tar sands crude to refineries on Texas' Gulf Coast.