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MPC, VLO, ANDV, PSX: How 3Q17 Treated Refiners

PART:
1 2 3 4 5 6 7 8
Part 8
MPC, VLO, ANDV, PSX: How 3Q17 Treated Refiners PART 8 OF 8

Could Valero’s Refining Margins Expand in 3Q17?

Valero’s refining margins

In the previous part, we analyzed Marathon Petroleum’s (MPC) refining margin indicators for 3Q17, which point toward better earnings. Also, Andeavor (ANDV) has published its refining index, which suggests refining margin expansion. For more on this, read What Andeavor’s 3Q17 Refining Index Reveals? In this part, we’ll look at Valero Energy’s (VLO) 3Q17 refining margin indicators.

Could Valero&#8217;s Refining Margins Expand in 3Q17?

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Refining cracks expand in September 2017

Valero operates refineries in the US Gulf Coast (or USGC), US Mid-continent (or Midcon), US West Coast (or USWC), and North Atlantic regions. Valero’s crack indicators expanded in all regions between August and September 2017. The USGC crack expanded from $19.10 per barrel in August to $21.80 per barrel in September, and the Midcon, USWC, and North Atlantic cracks expanded by $2.70 per barrel, $1.10 per barrel, and $2.70 per barrel, respectively. This refining crack expansion, which suggests stronger margins, was due to Hurricane Harvey.

Valero’s refining margins likely to expand

All four of Valero’s regional cracks expanded between 2Q17 and 3Q17, suggesting margin expansion. VLO’s Midcon crack expanded from $13.10 per barrel to $18.50 per barrel, and the USWC and North Atlantic cracks expanded by $2.20 per barrel and $3.70 per barrel, respectively. The USGC crack expanded by $3.90 per barrel to $19 per barrel.

Year-over-year, the Midcon crack witnessed the largest expansion, by $5.40 per barrel to $18.50 per barrel. The USGC crack expanded by $3.50 per barrel to $19 per barrel, and the USWC and North Atlantic cracks widened by $5 per barrel each, to $21.10 per barrel and $16.90 per barrel. To understand the refining industry better, check out our primer, An Investor’s Guide to the Refining Industry: All You Need to Know.

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