U.S. oil refiners expect first-quarter solid earnings on boosted margins on gasoline and diesel due to a steep dropoff in refining capacity and tightened crude oil supplies because of Russia's war with Ukraine, writes Reuters.
During the coronavirus pandemic, refining capacity worldwide has dropped, with several less profitable oil refineries closing.
However, the worldwide fuel demand has rebounded to near pre-pandemic levels, boosting profits for facilities that are still operating.
Seven U.S. independent refining companies are projected to post EPS of $0.61, compared with a loss of $(1.32) in the first quarter of 2021, according to IBES data from Refinitiv.
Profit margins for making both gasoline and distillates were already at their highest in several years coming into 2022 and have since risen, with the heating oil crack spread at nearly $41 per barrel by the end of March, almost $20 more than average over the past five years.
U.S. independent refiners, including Marathon Petroleum Corp MPC, Valero Energy Corporation VLO, and Phillips 66 PSX, also benefited from a surge in natural gas prices in Europe.
According to OPEC data, refinery feedstock costs soared in the first quarter as global benchmark Brent crude averaged near $98 a barrel for the first three months of the year. That was up about $18 from the last three months of 2021.
"Actual price outcomes will depend on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia's oil production or the sale of Russia's oil in the global market," the EIA wrote in its short-term energy outlook.
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