US refineries to record worst second-quarter results in a decade

(Reuters) – U.S. oil refineries are expected in the next few days to report the worst second-quarter results in a decade, with output exceeding demand, while pandemic-related closings have undermined trips by summer.

Fuel consumption has plummeted, with the latest US data showing a 25% drop in car trips from the previous year and a 75% decrease in passengers at airports. Refineries make most of their profits from domestic fuel sales, and the June quarter is one of the most important for travel.

The top seven independent refiners, including Valero Energy Corp (VLO.N), Phillips 66 (PSX.N), PBF Energy Inc (PBF.N) and Marathon Petroleum Corp (MPC.N), they are expected to record losses.

Valero is expected to report a loss per share of $ 1.41 on Thursday, according to IBES data from Refinitiv, compared to a profit of $ 1.51 the previous year. The group’s average deficit per share will be $ 1.05, according to Refinitiv, compared to a profit of $ 1.65 the previous year.

According to the United States Energy Information Administration, the refinery’s crude processing rates remain at approximately 2.8 million bpd, or 17% below the seasonal average in the past five years. Profits were also affected by high inventories as refineries increased in anticipation of business reopening.

Refineries with retail networks could receive a boost from tobacco and beer sales, which increased in the quarter and could offset lower year-on-year volumes, according to Credit Suisse.

“Refineries benefited as consumers who may have bought from larger, more crowded stores like Walmart (WMT.N) transferred the expense to smaller refinery retail stores, “said Matthew Blair, refining analyst at Tudor, Pickering, Holt and Co.

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Companies with a strong presence on the west coast face additional problems due to the second California shutdown, and technology companies like Facebook and Google have employees who work from home.

“The west coast’s refining margins will be extremely weak due to a boost in momentum demand … California was one of the first states to go into closure and has been hit again,” Blair said.

The Marathon refinery in Martinez, California, has been idle and at least one of two PBF Energy plants in California could be idle to reduce losses, Credit Suisse said.

“We do not see demand for gasoline recovering to pre-pandemic levels in California,” Credit Suisse refining analyst Manav Gupta said in a note.