When we last looked at New Zealand Refining Ltd [NZR.NZX] back in January 2011 its shares were trading at $4.66 and its prospects at that time were starting to look better as oil prices continued to climb and refining margins increased.
In June 2010 I picked the stock at $3.10 for the same reasons as stated above.
Yesterday the NZR finished trading at $4.50 for the day after reaching a 52 week high of $5.20 in late February.
The shares have traded upwards in the preceding months because of increased refining margins and an increased capacity to refine raw product after the plant upgrade in 2009 - 2010.
Profit has also been tipped to rise because of these favorable trading conditions.
The pullback from the February high seems analogous to the January/ February 2011 processing data which reveals that the processing fee for NZD 39.6 million was generated by a throughput of 6.7 million barrels for the first two months of the year. Refining margins have remained healthy with the average Gross Refinery Margin (GRM) generated for the two month period at USD 6.50 per barrel and the average exchange rate at USD/NZD 0.76.
Take an opportunity here to watch closely for your entry. Oil prices and margins should remain relatively high but recent oil price highs may not continue because of lower oil demand an speculation in oil markets that oil prices will ease.
Buy around current prices.
This stock was in the 2011 Share Investor Stock Picks at $3.95.
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c Share Investor 2011
