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Could Andeavor’s Refining Margins Expand in 3Q17?

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Andeavor’s refining margin index

Andeavor’s (ANDV) refining index values, which are regional crack indicators, have improved since 2Q17. Index values in California and the Pacific Northwest have risen to $15.80 and $13.10 per barrel, respectively, from $15.30 and $11.40 per barrel in 2Q17. Its mid-continent index value has risen to $16.90 per barrel from $16.30 per barrel in 2Q17. On a consolidated basis, Andeavor’s index has risen by $0.80 per barrel to $15.50 per barrel. Therefore, Andeavor’s refining margins are likely to expand in 3Q17.

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Andeavor’s refining margin index

Similarly, year-over-year, index values in all three regions have risen. Andeavor’s consolidated index has risen by $3 per barrel from 3Q16 to $15.50.

Peers’ margins in 3Q17

Like Andeavor, Marathon Petroleum (MPC) also publishes its refining margin indicators. So far in 3Q17, its blended LLS (Louisiana Light Sweet) and LLS-WTI (West Texas Intermediate) spreads have expanded, whereas the sweet-sour differential has narrowed, pointing towards a possible increase in Marathon’s refining earnings between 2Q17 and 3Q17. However, its RIN (renewable identification number) expenses have risen, which could negate some of the earnings rise. All four of Valero Energy’s (VLO) regional cracks have expanded, suggesting that its refining margins will expand between 2Q17 and 3Q17.

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