U.S. oil refiners are set to report significantly lower earnings for the second quarter compared to last year, following a tepid summer driving season that weakened refining margins.
Despite ramping up processing capacity to 93.5% to meet anticipated demand for gasoline and diesel, the actual demand fell short, impacting profits.
Rising diesel inventories, driven by new refineries in the Middle East and increased exports from China, further squeezed margins.
Analysts noted that refining cracks weakened through the quarter, surprising investors. The U.S. gasoline crack spread dropped to $22.02 per barrel in June, the lowest since February, while the diesel crack spread hit a two-year low of $22.22 per barrel.
Major oil companies like BP and Exxon Mobil have already indicated that lower refining margins would negatively affect their second-quarter results.
Valero Energy, the second-largest U.S. refiner, will start the earnings reports on Thursday, with expected profits of $2.60 per share, down from $5.40 last year.
Marathon Petroleum, the top U.S. refiner by volume, is forecast to report a profit of $3.22 per share on August 6, compared to $5.32 a year ago.
Phillips 66 is expected to report end-of-month earnings of $1.98 per share, down from $3.87 last year. Shares of Valero have dropped around 14% since the end of the first quarter, reflecting the challenging market conditions.