The top oil analyst on the street is Doug Terreson from Morgan Stanley. Doug has an excellent track record and is a great guy. Here are some of his latest comments:

THE GOLDEN AGE OF REFINING:

Maintain Overweight On Integrated Oils, R&M: Integrated Oils appear 15% undervalued on normalized returns on capital. Independent R&M represents the best value per unit of return in Energy, and remains the largest sector bet in the Global Model Energy Portfolio.

lden Age of Refining” To Surprise in 2006-07The Wall Street consensus was surprised by R&M in 2004-2005, although we maintain our original position: that 2006 will be the best year of the past 2 decades in R&M. Our outlook for 2007-2008 is similarly positive.

Raising Projections For 2006, 2007, & Mid-Cycle: Our updated assessment suggests that growth in demand (3.0 MMBPD) will easily surpass that of capacity during 2006-2007 (1.6 MMBPD). Our projection for US margins rises from $10.50/bbl to $11.00/bbl in 2006, and from $9.00/bbl to $11.00/bbl in 2007. Consensus appears near $9.00/bbl in 2006. Our mid-cycle projection rises from $5.70/bbl to $6.20/bbl.

Investment Catalysts Ahead in R&M: 1) Earnings projections for 2006-2007 need to rise, in some cases by 25-30%, 2) Normalized earnings estimates and price targets likely to rise significantly, 3) Higher normalized returns render higher valuation in the equity market.

Raising Price Objectives in R&M: Price target on Valero rises from $70/sh. to $75/sh. with Sunoco higher from $90/sh. to $95/sh. Positive revisions ahead for Integrated Oils.