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How Tesoro’s Refining Margins Panned Out in 2Q16

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Tesoro’s refining margin in 2Q16

Tesoro (TSO) noted a fall in its GRM (gross refining margin) of $3.4 per barrel YoY (year-over-year) to $15.7 per barrel in 2Q16. Its operating costs fell $0.9 per barrel YoY to $5 per barrel in 2Q16. The fall in its gross margin was partly offset by a fall in its operating costs.

Still, TSO’s net refining margin fell by $2.6 per barrel YoY to $10.7 per barrel in 2Q16. Tesoro’s EBITDA (earnings before interest, tax, depreciation, and amortization) from its refining segment fell from $880 million in 2Q15 to $692 million in 2Q16.

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The regional cracks in which Tesoro operates are the ANS (Alaskan North Slope) West Coast 3-2-1 and the WTI (West Texas Intermediate) Midcontinent 3-2-1 crack spreads. Both these crack spreads fell in 2Q16 compared to 2Q15. The West Coast 3-2-1 crack spread fell from $26.9 per barrel in 2Q15 to $19.9 per barrel in 2Q16. Similarly, the Midcontinent crack spread fell from $19.3 per barrel in 2Q15 to $12.9 per barrel in 2Q16.

Refining margins of Tesoro and peers

TSO’s peers also noted falls in their refining margins YoY in 2Q16. Marathon Petroleum (MPC) noted a fall in its gross refining and marketing margin by $2 per barrel over 2Q15 to $12.8 per barrel in 2Q16. Valero Energy (VLO) noted a fall in its gross refining margin to $8.9 per barrel in 2Q16 compared to $13.7 per barrel in 2Q15. Western Refining (WNR) also witnessed a fall in its gross refining margin in the period.

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