U.S. refiners set to boost profits on strong fuel demand

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Oct. 18 (Reuters) – U.S. refiners are expected to post higher profits for the third quarter as gasoline and diesel sales margins improved despite soaring crude oil costs, analysts said.

After more than a year of declining fuel demand, gasoline and distillate consumption is back at five-year averages in the United States, the world’s largest fuel consumer. This has increased the margins on refined products to more than double what these companies were doing at the same time a year ago.

The seven largest independent U.S. refiners, including giants Marathon Petroleum (MPC.N) and Valero Energy (VLO.N), are expected to post an average gain per share of 66 cents, compared to a loss of $ 1.32 for the third quarter 2020, according to IBES data from Refinitiv. (GRAPHIC: https://graphics.reuters.com/USA-REFINERIES/EARNINGS-OUTLOOK/mopanjqyzva/)

These gains are due to the 3-2-1 crack gap, an indicator of refining margins, which assumes that one barrel of crude oil is refined into three parts gasoline, two parts diesel and one part jet fuel. . This spread is currently $ 21 a barrel, down from about $ 9 a year ago.

Energy demand recovered quickly from the worst days of the pandemic in 2020, and prices for Brent and U.S. crude oil have hit multi-year highs in recent days. But the demand for products also increased, which helped to increase the margins.

Product supplied – an indicator of demand for refined products in the United States – was 21.5 million barrels per day in the most recent week, slightly higher than the same period in 2019, before the start of the pandemic, according to the United States Energy Information Administration (EIA). .

“The market is returning to equilibrium,” Credit Suisse analyst Manav Gupta said in a note.

Refiners are also benefiting from lower inventories of their products, as recent storms and the pandemic have taken refining capacity offline. About 2.5 million barrels per day of refining capacity have been shut down since the start of the pandemic, which is nearly four times the 10-year average, according to Credit Suisse’s Gupta.

Delta Air Lines’ refinery in Monroe, Pa. Earned nearly $ 100 million last quarter, its first positive results since the first quarter of 2020, according to figures released last week. Tudor Pickering Holt analysts cited the heavy spread of gasoline and diesel cracking as helping the refiner recover.

Demand for jet fuel is still below pre-pandemic levels, but international flights are expected to resume to Europe in November. The spot price of kerosene-type jet fuel from the US Gulf Coast is $ 2.10 per gallon, the highest since October 2018, despite demand still 12% below 2018 levels, data shows of the EIA.

Analysts have also increased estimates for refiners such as PBF Energy and Hollyfrontier due to falling costs of complying with national biofuels laws. Refiners are required to blend ethanol into the country’s gasoline pool or buy credits for those who can.

The cost of these loans fell sharply in the third quarter. Reuters reported in September that the U.S. Environmental Protection Agency is expected to recommend reducing federal biofuel blending mandates for 2021 to levels below 2020, analysts said. Read more

U.S. independent refiners are expected to post improved quarterly results compared to 2020.

Reporting by Laura Sanicola; Editing by Daniel Wallis

Our standards: Thomson Reuters Trust Principles.


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