Big crude oil margins should boost U.S. refiner earnings

NEW YORK (Reuters) – U.S. refiners ran full-tilt in the second quarter, fueled by cheap domestic crude and fat margins that should boost earnings, though their heavy activity could eventually saturate the market with gasoline, sapping profits down the road. U.S. independent refiners, including Phillips 66 and Marathon Petroleum Corp, are expected to announce strong results due to the heavy discounts for U.S. and Canadian crude, along with strong fuel demand and lower costs to comply with the nation’s biofuel laws, analysts said. Strong crack spreads – the margin on turning crude oil into diesel, gasoline and other products – have spurred refiners to keep production high. That margin averaged about $21.07 per barrel in the second quarter, its highest since 2015. Among the largest independent refiners, Marathon, CVR Energy, and Hollyfrontier Corp rank in the top 10 percent in Thomson Reuters analyst revisions models, which weighs recent changes in estimates for revenue and per-share earnings, suggesting positive trends headed into reporting season for refiners, which begins next week. The discount on crude prices in Midland, Texas widened by nearly $10 a barrel against benchmark futures during the second quarter, as production in the Permian surged beyond pipeline capacity to… continue reading

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