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Marathon Petroleum’s Q1 Refining Earnings Outlook

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Oct. 11 2020, Updated 12:14 p.m. ET

Refining earnings indicator

Marathon Petroleum’s (MPC) refining margin and earnings are impacted by the blended crack, the sour differential, and the sweet differential. According to Marathon Petroleum, a dollar per barrel rise in the blended crack expands its annual net income by $900 million. A dollar per barrel shift in the sour differential and the sweet differential alters the company’s yearly net income by $450 million and $370 million, respectively.

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Refining margin indicators

So far in the first quarter, according to Marathon Petroleum, the blended crack has fallen by $2.1 per barrel YoY (year-over-year) to $6.5 per barrel. The prompt sour differential has narrowed by $2.6 per barrel YoY in the first quarter. Marathon Petroleum processed 50% sour crude in its refineries in the fourth quarter. However, the prompt sweet differential has widened by $3.2 per barrel YoY in the first quarter.

Marathon Petroleum’s refining earnings indicators have shown a mixed trend. While the crack and sour differential have fallen, the sweet differential has risen. The movement suggests that the company’s refining earnings could broadly decrease in the first quarter. However, these indicators only show data for January and February. The indicators will vary based on March data, which are currently showing an improvement.

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