How Are the Refining Margins Trending in Q1 2019?



HollyFrontier’s refining index values

To gauge the refining margin environment in the first quarter, we’ll discuss the refining margin indicators published by HollyFrontier (HFC), Marathon Petroleum (MPC), and Valero Energy (VLO).

HollyFrontier’s (HFC) refining index values point towards the refining crack conditions in the regions where the company operates.

So far in the first quarter, the index values have put up a mixed trend YoY (year-over-year). While the index value in the Midcon and Rockies have fallen YoY, it has risen in the Southwest. The Midcon and Rockies accounted for 73% of HollyFrontier’s total throughput in the fourth quarter. So, the YoY decline in the refining index values in these regions points toward a weaker refining crack environment for HollyFrontier in the first quarter.

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Valero Energy

Valero Energy publishes regional refining crack indicators for four major areas—the US Gulf Coast, the US Mid-continent, the US West Coast, and the North Atlantic. These indicators point towards the refining crack trend in the region. Valero Energy’s crack indicators have declined across all four of the areas YoY in the first quarter. The fall in the indicators might mean a weaker refining margin for the company in the first quarter.

Marathon Petroleum

Marathon Petroleum’s crack indicator, blended crack, has fallen 49% YoY to $4.4 per barrel in the first quarter. The prompt sour differential has fallen 30% YoY.

Overall, the above three refiners point towards weaker refining cracks YoY in the first quarter. The data could mean subdued refining margins and earnings for these companies in the first quarter.


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