
U.S. oil refiners are expected to report significantly lower profits for the third quarter of 2024 compared to last year, driven by weakening margins and softening fuel demand. After benefiting from favorable pricing following the pandemic and Russia's invasion of Ukraine, refiners now face declining gasoline and diesel crack spreads. In September, the gasoline crack spread fell to $11.73 per barrel, its lowest since November 2023, while the diesel crack spread dropped to $17.98 per barrel, the lowest since July 2021.
Fuel demand remains about 5% below pre-COVID levels, and increased supply from new refineries worldwide has further pressured margins. Major refiners like Valero Energy and Marathon Petroleum are projected to see significant year-over-year declines in earnings, with Valero expected to report $1.01 per share, down from $7.49 last year.
Phillips 66 recently announced plans to close its Los Angeles-area refinery due to low profits. Additionally, oil majors such as BP and Exxon Mobil have warned of lower refining margins. Despite these challenges, analysts anticipate some refiners may announce share buybacks as a strategy to return value to shareholders, given the lack of growth projects in development. Overall, U.S. refiners face a tough landscape marked by lower margins and increased global competition.
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