The first quarter earnings of U.S. fuel makers are expected to rise due to strong fuel exports and favorable margins, despite a decline in domestic diesel demand. The pandemic-related closures have boosted margins for refiners, and alternating periods of higher demand for certain products have also helped. However, analysts predict that the second quarter will see a decline as exports decrease and capacity increases in Asia, the Middle East, and the U.S. Gulf Coast.
Valero Energy, Marathon Petroleum, and Phillips 66 are all expected to post strong per share profits, based on estimates compiled by Refinitiv. Additionally, Exxon Mobil has signaled its refining profits could reach $3.55 billion for the period compared to $332 million a year ago.
Despite the positive outlook for the first quarter, the four-week average of U.S. distillate product supplied, a proxy for demand, has remained below the five year average for most of the first quarter, according to the U.S. Energy Information administration. Jefferies bank analysts have also noted longer-term demand concerns that continue to weigh on refiners, pointing to projected lower industrial activity in OECD member countries that will only be partially offset by China.
Overall, U.S. refiners are in a strong financial position for the time being, but the future remains uncertain due to various factors affecting demand and capacity.
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