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Due to the demand crash in the lockdown, the seven largest independent oil refiners in the United States are expected to report losses for the second quarter that would be the worst Q2 quarterly figures in the refining industry in a decade, Reuters estimates of analyst forecasts show.
The earnings reporting season for U.S. refiners begins on Thursday, with Valero Energy expected to report a loss per share of $1.41, versus earnings per share of $1.51 for the second quarter of 2019, according to IBES data from Refinitiv.
For the first quarter, Valero had already reported a net loss of $1.9 billion, compared to a profit for the same period last year, after it took a $2-billion hit in the value of its inventory.
“It’s been a very challenging start to the year with significant impacts to families, communities and businesses world-wide brought on by the COVID-19 pandemic,” Joe Gorder, Valero’s chairman and CEO said, commenting on the Q1 results.
According to analyst expectations, the Q2 figures could be equally dismal, not only for Valero but for the other top independent refiners. In the second quarter, oil demand crashed as most of the United States was under lockdown with people staying home or not traveling far.
As a result, inventory of refined oil products was rising, and so was the U.S. commercial crude oil stockpile. Refiners drastically cut crude oil inputs and processing rates in April and May, and refining margins were bleak.
Some refiners idled refineries as demand was very weak. Marathon Petroleum, for instance, idled its Martinez refinery in California. Refiners with more exposure to California and the West Coast are facing very weak refining margins because of the resurgence of coronavirus cases in California, analysts told Reuters.
Overall, crude oil inputs at American refiners are still down 16.6 percent from year-ago levels, at 14.206 million bpd for the week to July 17, as per EIA data. Refinery utilization was at 77.9 percent for the week to July 17, compared to 93.1 percent for the same week last year.