Analysts forecast stronger earnings for U.S. oil refiners

Valero Energy, Marathon Petroleum and Phillips 66 could improve their quarterly results as fuel supplies tighten. RBC reported analysts' expectations on October 9, citing The Wall Street Journal.

JPMorgan's forecast cited in the report puts Valero's potential third-quarter pretax earnings at $8.95bn. That would be 50% above the previous quarter and 24% above its record in mid-2022. Piper Sandler expects Marathon's earnings per share to rise more than sevenfold year on year. These figures are forecasts rather than published company results.

Valero has confirmed it will release its financial results on October 22. The source report says the three companies' results are expected in late October and early November.

Refiners benefit when the gap between crude oil prices and the value of the fuel they produce widens. That gap is known as the crack spread. Industrial Info Resources data cited by RBC indicated that about 12.1% of global refining capacity was offline in September. Middle Eastern disruptions and reduced Asian exports are putting further pressure on refined fuel supply.

Novi Labs analyst John Auers regards the current high margins as temporary and links that assessment to companies' caution about expanding production. High utilisation at existing refineries helps offset shortages but also increases the market's dependence on uninterrupted plant operations. Hurricanes or mechanical failures could reduce available supplies.