Top Three U.S. Refiners Set For First Profits Since Pandemic Started

The largest U.S. oil refiners are expected to report in the coming days profits for the second quarter-their first earnings since the pandemic crushed demand in early 2020, according to estimates from Reuters.

Since the first quarter of 2020, refiners have struggled with low fuel demand amid lockdowns and mobility restrictions, which led to low capacity utilization rates and very low refining margins.

The second quarter of this year, however, will likely see decent earnings results from all three largest refiners in the U.S.-Valero Energy, Phillips 66, and Marathon Petroleum Corporation. That's thanks to higher fuel demand in America, increased run rates at refineries, and rising refining margins.

According to estimates cited by Reuters, these three refiners are expected to report on Thursday and next week around $675 million in combined net profit for the second quarter.

But this estimate has been nearly halved over the past month-analysts expected at the end of June $1.3 billion in combined net earnings. The lower projections in recent days are the result of high oil prices in recent weeks, which dent profits for refiners, as well as sliding industry margins in June.

Moreover, analysts tell Reuters that concerns about the resurging COVID cases could mean that Q2 could be the 'peak profit' quarter for American refiners this year.

For Q1, Valero, Marathon Petroleum, and Phillips 66 all reported losses, but their managers were upbeat about fuel demand and refining margins going forward.

"Things are definitely improving. It's hard to tell the exact pace that the margins and cash flows are going to recover, but we're certainly headed in the right direction," Jason Fraser, Executive Vice President and CFO at Valero, said on the Q1 earnings call in April.

"And as we expect gasoline demand to kind of roll back here in the summer season, we're ready to run," Robert Herman, Executive Vice President of Refining at Phillips 66, said at the end of April.

By Tsvetana Paraskova for Oilprice.com

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