Jan 23 (Reuters) – U.S. oil refiners are anticipated to report greater fourth quarter earnings due to robust demand and wholesome margins from processing crude oil into motor fuels, mentioned analysts.
Earnings final yr from turning oil into gasoline, diesel and jet gas hit multi-decades highs as crops ran full bore to satisfy rising journey and exports demand. Earnings surged into the stratosphere for a sector that had been largely written off as the primary sufferer of the vitality transition.
Valero Power, the second-largest U.S. refiner by capability, kicks off earnings on Thursday with a projected per share revenue of $7.19, in accordance with Refinitiv, practically thrice the $2.47 of a yr in the past.
High refiner Marathon Petroleum (MPC.N) is forecast to indicate a $5.70 per share revenue, in comparison with $1.27 a yr in the past, whereas Phillips 66 might ship a $4.46 per share, in comparison with $2.88 a yr in the past, in accordance with Refinitiv. Each are scheduled to report on Jan. 31.
“Refiners are tied as the most effective vitality sub-sector in 2022,” alongside oilfield providers, wrote Jason Gabelman, a analysis analyst at Cowen, in a latest be aware.
The U.S. crack unfold , a measure of the revenue from shopping for oil and promoting gasoline and diesel, peaked final quarter at $45, greater than double the height in the identical interval final yr.
The fourth quarter might far exceed pre-pandemic earnings, mentioned Tudor Pickering Holt analyst Matthew Blair. Trade revenue for the quarter might common $3.95 a share, “solely a hair beneath full-year” 2019 revenue for the sector, he wrote in a be aware.
Outcomes benefited from margins on diesel, a traditionally extensive unfold between gentle and heavy crudes, and refiners maximizing their processing final quarter, Blair mentioned.
Margins on diesel and different distillates rose $8 per barrel, to about $58, triple the margins in the identical interval final yr. A traditionally extensive, about $18 per barrel, unfold between gentle and heavy crude oil additionally aided refiners.
Many ran their crops at above 90% utilization charges, in accordance with knowledge from the U.S. Power Data Administration and purchased feedstock at decrease prices, as U.S. crude futures dropped 5.7% over the prior quarter to $81.50 per barrel.
One cause diesel demand is powerful: refiners are utilizing diesel to scale back the quantity of sulfur in gas oil bought for ocean delivery. The worth distinction between high- and low-sulfur gas oil may be very extensive, indicating extra diesel is getting used to make low sulfur gas oil, mentioned Andrew Lipow, president of consultants Lipow Oil Associates.
The excessive margins could not final this yr, nonetheless. Releases from the U.S. Strategic Petroleum Reserve have ended, lowering provides of bitter crude oil available in the market. Much less Russian crude and OPEC exports might tighten heavy and lightweight spreads, wiping away one other refiner profit.
Reporting by Laura Sanicola; Enhancing by David Gregorio
Our Requirements: The Thomson Reuters Belief Ideas.
