MOSCOW (MRC) -- US oil refiners expect strong first-quarter earnings as margins to sell gasoline and diesel strengthened due to a steep dropoff in refining capacity and crude oil supplies tightened because of Russia's war with Ukraine, reported Reuters.
Refining capacity worldwide has dropped during the coronavirus pandemic, with several less profitable oil refineries closing in the last two years. However, worldwide fuel demand has rebounded to near pre-pandemic levels, boosting profits for facilities that are still operating.
Seven US independent refining companies are projected to post earnings-per-share of 61 cents, compared with a loss of USD1.32 in first quarter of 2021, according to IBES data from Refinitiv.
Profit margins for making both gasoline and distillates - diesel, jet fuel and heating oil - were already at their highest in several years coming into 2022, and have since risen, with the heating oil crack spread at nearly USD41 per barrel by the end of March, nearly USD20 more than average over the past five years.
US independent refiners including Marathon Petroleum Corp , Valero Energy Corp and Phillips 66 also benefited from a surge in natural gas prices in Europe which occurred due to the risk of European sanctions on Russian energy exports.
Valero kicks off refinery earnings on Tuesday; Phillips reports on Friday, with Marathon the following week.
Natural gas is needed to operate various units of oil refineries and the expense caused some European refineries to cut runs, particularly distillate-producing units. This contributed to a sharp fall in distillate inventories worldwide, putting a premium on production of diesel and jet fuel.
"Geopolitical dynamics should support US refiners on wide natural gas spreads, though some impacts may be less visible with first quarter earnings than in future quarters," said Jason Gabelman, refining analyst at Cowen.
As MRC wrote previously, San Antonio-based Valero Energy Corp, the second-largest US oil refiner, ran its 14 refineries at between 88% and 92% of their combined capacity of 3.2 million barrels per day (bpd) in the fourth quarter of 2021.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,487,450 tonnes in 2021, up by 13% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market totalled 1,494.280 tonnes, up by 21% year on year. Deliveries of homopolymer PP and PP block copolymers increased, whreas, shipments of PP random copolymers decreased significantly.