Valero’s refining margin indicators
Refining cracks fall in December 2017
Valero Energy (VLO) announces area-wise crack indicators where its refineries operate. The four regions where Valero operates its refineries are US Gulf Coast (or USGC), US Midcontinent (or Midcon), US West Coast (or USWC), and North Atlantic.
Valero’s crack indicators have fallen in all the areas in December 2017 compared to November 2017. The USGC crack indicator fell from $16.90 per barrel in November to $15.20 per barrel in December.
Midcon, USWC, and North Atlantic decreased by $4.10 per barrel, $6.50 per barrel, and $3.40 per barrel, respectively, over November. The fall in refining cracks in all four areas could point toward a weakened margin environment for VLO in December 2017 compared to November 2017.
Valero’s refining margins likely to rise in 4Q17 over 3Q17
VLO’s four regions have seen a decline in average regional cracks in 4Q17 compared to 3Q17. VLO’s Midcon crack indicator fell from $18.50 per barrel in 3Q17 to $16.50 per barrel in 4Q17.
Similarly, USWC and North Atlantic indicators fell by $6.90 per barrel quarter-over-quarter and $3.40 per barrel quarter-over-quarter, respectively, in 4Q17.
The USGC crack fell by $2.40 per barrel over 3Q17 to $16.50 per barrel in 4Q17. The fall in all four zones in points toward the likely decline in VLO’s refining margins in 4Q17 over 3Q17.
On a yearly basis, cracks have risen in three of the four areas. Midcon witnessed the largest rise in margin indicator in 4Q17 over 4Q16. But North Atlantic crack fell by $0.60 per barrel YoY to $13.50 per barrel in 4Q17. The USWC margin rose by $0.20 per barrel over 4Q16 to $14.20 per barrel in 4Q17.
The USGC and Midcon cracks have widened by $0.90 per barrel and $5.50 per barrel, respectively, over 4Q16 to $16.50 per barrel each in 4Q17.
So, a year-over-year rise in three of the four areas implies a likely surge in Valero’s refining margin in 4Q17 over 4Q16.
If you’d like to know about the ranking of refiners based on their dividend yields, you can refer to Ranking Key Refining Stock Dividend Yields: Who Stands Where?