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Behind Valero’s Refining Margin Trend in 2017



Valero’s refining margin trend

Valero Energy (VLO) saw an increase in its GRM (gross refining margin) to $8.1 per barrel in 1Q17, compared with $7.7 per barrel in 1Q16. VLO’s operating costs grew by $0.44 per barrel YoY in 1Q17.

The rise in VLO’s GRM was offset by a surge in its operating costs, leading to a stable net refining margin of $2.5 per barrel in 1Q17.

The most important factors influencing Valero’s GRM include refined product cracks, the costs of other feedstocks and blendstocks, and the sweet-sour crude oil spreads. Gasoline and diesel cracks in 1Q17 increased in the US West Coast, the US Gulf Coast, the US Mid-Continent, and North Atlantic.

The Brent-WTI (West Texas Intermediate), Brent-ANS (Alaska North Slope), Brent-Maya, and Brent-LLS (Louisiana Light Sweet) oil spreads also grew in 1Q17 over 1Q16.

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Valero’s peers

VLO’s peers also witnessed rises in their refining margins in 1Q17. Marathon Petroleum’s (MPC) gross refining and marketing margin rose $1.8 per barrel over 1Q16 to $11.7 per barrel in 1Q17. Tesoro (TSO) saw an increase in GRM by $1.9 per barrel YoY to $9.4 per barrel in 1Q17, while Phillips 66’s (PSX) worldwide refining margin rose $1.4 per barrel, or 20%, over 1Q16 to $8.6 per barrel in 1Q17.

Continue to the next part for a look at Valero’s refining margin outlook for 2Q17.


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