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Does Andeavor’s Refining Index Trend Imply Weaker 1Q18 Margins?


Mar. 7 2018, Updated 2:02 p.m. ET

Andeavor’s refining index

Andeavor’s refining index values, which are regional crack indicators in the areas where ANDV operates, are showing a weakness quarter-over-quarter in 1Q18.

The index values in California and the Pacific Northwest have fallen to $9.10 per barrel and $10.20 per barrel, respectively, in 1Q18 from $9.80 per barrel and $11 per barrel, respectively, in 4Q17. ANDV’s Midcontinent index value has fallen to $15.70 per barrel in 1Q18 from $17.40 per barrel in 4Q17.

On a consolidated basis, ANDV’s index has fallen $1.10 per barrel over 4Q17 to $11.80 per barrel in 1Q18. That points to a likely fall in Andeavor’s refining margins in 1Q18 compared to 4Q17.

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Andeavor’s refining index trend year-over-year

Andeavor’s index values YoY (year-over-year) have shown a mixed trend. The index value for California has declined $3.10 per barrel YoY to $9.10 per barrel in 1Q18. However, the index values for the Pacific Northwest and Midcontinent have risen $0.30 and $2.50 per barrel, respectively, YoY to $10.20 and $15.70 per barrel, respectively, in 1Q18. Andeavor’s consolidated index fell $0.40 per barrel over 1Q17 to $11.80 per barrel in 1Q18, pointing to a likely decrease in ANDV’s refining margin in 1Q18 over 1Q17.

Andeavor could be witnessing narrower refining margins in 1Q18 on a quarterly as well as yearly basis.

Peers’ likely margins in 1Q18

Marathon Petroleum’s (MPC) blended LLS (Light Louisiana Sweet) crack has fallen in 1Q18 over 4Q17. Its LLS-WTI (West Texas Intermediate) spread has fallen quarter-over-quarter in 1Q18. However, its sweet-sour differential has risen. So the rise in its sweet-sour differential could be offset by the fall in its blended LLS crack and the decline in the LLS-WTI spread quarter-over-quarter. The situation could be pointing to a fall in MPC’s refining earnings in 1Q18 over 4Q17.

Three of Valero Energy’s (VLO) four regions have seen a decrease in average regional cracks in 1Q18 compared to 4Q17. That could point to a fall in VLO’s refining margins in 1Q18 over 4Q17.


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