Analyzing MPC, VLO, HFC, and PSX’s Refining Margins

In this part, we’ll compare the gross refining margins of leading US downstream companies. HollyFrontier (HFC) had the highest gross refining margin in the fourth quarter followed by Phillips 66 (PSX), Marathon Petroleum (MPC), and Valero Energy (VLO). These companies’ margins rose YoY (year-over-year) in the fourth quarter.

Marathon Petroleum’s gross refining and marketing margin rose by $2.0 per barrel from the fourth quarter of 2017 to $15.1 per barrel in the fourth quarter. The refining margin rose due to the broader WCS-WTI differential. However, the blended crack was lower YoY in the fourth quarter.

Valero Energy’s gross refining margin rose from $8.8 per barrel in the fourth quarter of 2017 to $11.0 per barrel in the fourth quarter. The company’s refining margins rose. Valero Energy utilized its midstream assets to process more discounted North American crude oil. Valero used the Sunrise Pipeline expansion, Line 9B, and Diamond Pipeline to tap the North American oil. Most of the other oil spreads grew YoY in the fourth quarter, which supported Valero Energy’s margins.

HollyFrontier’s gross refining margin rose by $9.6 per barrel from the fourth quarter of 2017 to $22.2 per barrel in the fourth quarter. The gross refining margin rose was due to the YoY rise in refining margins across all three regions. HollyFrontier’s Mid-Continent region’s (where the El Dorado and Tulsa refineries are located) net refining margin rose from $6.3 per barrel in the fourth quarter 2017 to $12.5 per barrel in the fourth quarter. The situation was similar for the Southwest and Rocky Mountain regions.

Phillips 66’s worldwide refining margin rose by $7.6 per barrel or 84% YoY to $16.5 per barrel in the fourth quarter. The refining margin rose due to higher refining margins in all four of the company’s operating regions. Wider oil spreads drove Phillips 66’s refining margin.