Moody's Investors Service on Tuesday revised its outlook for the oil refining and marketing sector, saying demand may fall short of expanding capacity over the next 12 months to 18 months.
The ratings agency changed its outlook to "stable" from "positive" for the sector. A "stable" outlook means that Moody's expects business conditions in that sector neither to improve nor deteriorate significantly for up to 18 months.
Nearly 2.4 million barrels per day of additional capacity is expected to be added worldwide in 2012, Moody's said. That compares with an estimated global demand of 1.6 million barrels per day next year.
Gretchen French, Moody's vice president and senior analyst, said in a statement that a glut of capacity could suppress margins across the sector as early as next year "if demand or capacity rationalization fails to offset anticipated supply increases."
Among the challenges facing the sector are higher prices for oil, gasoline and distillates, sluggish economies in the U.S. and Europe and China's efforts to slow its economy to curb inflation, Moody's said.
The excess capacity could have the biggest effect on companies exposed to markets in California or the Atlantic Basin such as Petroplus and Sunoco Inc., the agency said.
Refining companies in the Midwest states are expected to continue experiencing "extraordinary margins" because of favorable economics, Moody's said. They include HollyFrontier Corp., Marathon Petroleum Corp. and CVR Energy Inc.
Shares of Sunoco Inc. rose 85 cents, or 2.3 percent, to close at $37.79. HollyFrontier rose 5 cents to close at $72.30. Marathon Petroleum rose 3 cents to close at $36.03 and CVR Energy rose 36 cents to $28.49.