Why Marathon Petroleum Stock Slipped Today
Key Points
At this point, it's mulling over different options and might not opt for a full ban.
Marathon is a major producer of diesel in this country.
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The latest White House proposal to rein in diesel prices and an analyst's recommendation downgrade were the major factors behind Marathon Petroleum's (NYSE: MPC) stock price dip on Tuesday. At the close of that day's trading session, the company's equity was down more than 3%.
Potential export ban
Treasury Secretary Scott Bessent said that the Trump administration is mulling a ban on U.S. diesel exports. He added that this would reduce prices for the fuel, commonly used for cargo trucks, which continue to reach all-time high prices. Almost needless to say, many analysts and economists attribute this rise mainly to the impact of the Iran war.
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Bessent implied this was only a proposal at this stage. He said the Trump team is "examining whether it's feasible in terms of the overall refining capacity and whether a full or partial ban would work."
Compounding that, well before market open, Jefferies' Lloyd Byrne downgraded his rating on Marathon to hold from buy, with a price target of $413 per share. According to reports, the analyst wrote that the current price and valuation are consistent with historical levels, while threats loom on the horizon -- such as a consumer pull-back due to those rising diesel prices.
Distillates for domestics only?
Marathon is a prominent American oil refiner and is highly active in the distillates segment, which includes diesel and jet fuel. What's more, those goods make up the bulk of the company's exports from its Gulf Coast refineries. So even a partial and/or temporary ban would negatively affect its operations.
Given that, I think Byrne's move is the right one; personally, I'd hold this stock at best, and not be a buyer now.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.
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