U.S. Refiners Expected to Post Dismal Second-Quarter Results

The coronavirus pandemic stymies ground and air travel, weighing on the industry’s performance.

July 30, 2020

ALEXANDRIA, Va.—With pandemic-related closings sapping summer travel, U.S. oil refiners are expected to report the worst second-quarter results in a decade, according to the New York Times.

The latest U.S. data show a 25% drop in auto travel from a year ago and a 75% decline in passengers at airports. Refiners get the bulk of their profits from domestic fuel sales, with the June quarter among the biggest for travel.

The seven top independent refiners, including Valero Energy, Phillips 66, PBF Energy and Marathon Petroleum, are expected to post losses. Valero is expected to report a per-share loss of $1.41, according to IBES data from Refinitiv, compared with a year-earlier profit of $1.51 a share.

Refinery crude processing rates remain about 2.8 million barrels per day (bpd), or 17% below the seasonal average over the past five years, reports the U.S. Energy Information Administration. Profits were hurt by high inventories, as refiners ramped up in anticipation of businesses reopening after the COVID-19 lockdown.

Refiners with retail networks could receive a boost from sales of tobacco and beer, which ticked up during the quarter and could offset lower year-on-year volumes, according to Credit Suisse.

“Refiners benefited as consumers who may have shopped at bigger, more crowded stores like Walmart shifted spending to smaller refiner retail locations,” said Matthew Blair, refining analyst at Tudor, Pickering, Holt and Co.

Companies with heavy West Coast presence face additional challenges because of California’s second lockdown. Many large companies, such as Facebook and Google, still have their employees working from home.

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