Refining Margins in 2Q17: A Comparison

In this part, we’ll compare leading US downstream companies’ GRMs (gross refining margins). Marathon Petroleum (MPC) had the widest GRM in 2Q17, followed by Andeavor (ANDV), Phillips 66 (PSX), and Valero Energy (VLO). The companies saw mixed GRM trends in 2Q17—let’s look at them more closely.

MPC’s gross refining and marketing margin narrowed by $1.40 to reach $11.30 per barrel between 2Q16 and 2Q17. The contraction was primarily due to higher oil and feedstock costs led by a narrower sweet-sour spread. This narrowing was somewhat offset by a wider blended LLS (Light Louisiana Sweet) 6-3-2-1 crack. The refining segment reported a YoY (year-over-year) drop of 45% in operating income to $562 million in 2Q17.

Valero Energy’s (VLO) GRM expanded by $0.07 per barrel YoY to $8.66 per barrel in 2Q17. Gasoline and diesel cracks followed mixed trends in the US Gulf Coast, the US West Coast, the US mid-continent, and North Atlantic operating zones. Similarly, the Brent–WTI (West Texas Intermediate) and Brent–LLS oil spreads widened between 2Q16 and 2Q17. However, the Brent-Maya and Brent-ANS (Alaska North Slope) spreads narrowed YoY.

Andeavor’s (ANDV) GRM narrowed by $6.30 per barrel YoY to $9.50 per barrel in 2Q17. ANDV’s refining margin narrowed across its Pacific Northwest, California, and midcontinent operating zones.

PSX’s worldwide refining margin expanded by $1.30 per barrel, or 18%, to $8.40 per barrel between 2Q16 and 2Q17. The largest expansion of $1.60 per barrel, or 30%, was seen in the Gulf Coast region. The Atlantic Basin/Europe zone registered a $1.80 per barrel, or 28%, YoY expansion. The Central Corridor’s GRM expanded by $1.30 per barrel YoY, or 15%, and the West Coast’s narrowed by 1% YoY.