VLO and oil in general are taking a hit right now because of the warm winter (see article below), but I think VLO and oil will do well in the long term. There are many variables in the price of oil, and warm weather is only one of them. The winter is not over yet, there’s still a chance colder weather will appear. The middle east conflicts also affects oil prices. If there is a shortage in supply, oil prices will go up. Odds are, the the prices of oil will go up in the long term. I’ll hold on my shares of VLO.
Verdict: HOLD on VLO
Source: Scottrade News 1/2/2007
Oil Prices Face Warm Weather, High Stocks
The new year began with a whimper, weatherwise, in the world’s biggest heating oil market. In New York City, temperatures on the first day of 2007 hit a peak of 54 degrees – 45% above normal and 10 degrees warmer than the first day of spring 2006. The current spring-like weather – in line with forecasts – looks likely to put strong pressure on heating oil and crude oil futures prices when trading resumes on the New York Mercantile Exchange on Wednesday. But there’s more afoot that can rile the market than just the warmest December on record in Boston, in the heart of New England, where heating oil inventories stand at their highest level since 1998. Latest revised data from the U.S. Energy Information Administration show oil demand in October in the U.S. – the world’s largest oil consumer – was 2.7% lower than expected, though still 2.5% above a year ago. The new figures put demand at 20.757 million barrels a day in October – some 567,000 barrels a day below earlier indications – as demand figures for heating oil, gasoline and jet fuel were reduced. EIA’s preliminary data would have put October demand at 21.324 million barrels a day, the highest level since December 2005.
The weakness at the start of the fourth quarter calls into question whether U.S. demand will manage to post even the modest year-to-year gain of 1.25% to 21.05 million barrels a day, which EIA forecasts would make it the strongest quarter of 2006.