Global fuel prices soar U.S. refiners are off to a strong start to 2022

The reporter learned that U.
S.
refiners are expected to make strong
profits in the first quarter due to the strengthening of gasoline and diesel sales margins, a sharp decline in refining capacity, and tight crude oil supply due to the Russian-Ukrainian war.

Global refining capacity has declined during the pandemic, with several less profitable refineries closing
in the past two years.
However, global fuel demand has rebounded to near-pre-pandemic levels, boosting profits at facilities that are still operating
.

According to Refinitiv's IBES data, seven U.
S.
independent refining companies are expected to earn 61 cents per share, compared to a loss of $
1.
32 in the first quarter of 2021.

Production margins for gasoline and distillates have reached their highest levels in several years by 2022 and have been rising ever since, with heating oil cracking spreads approaching $41 per barrel by the end of March, nearly $
20 above the average over the past five years.

Including Marathon Oil (MPC.
US), Valero Energy (VLO.
US) and Phillips66 (PSX.
U.
S.
independent refiners, including US), have also benefited
from soaring natural gas prices in Europe.
The risk of European sanctions on Russian energy exports has led to a spike
in gas prices.

Valero Energy will report refinery earnings on Tuesday, Phillips6 will report on Friday, and Marathon Oil's earnings report will be sent
out next week.

Natural gas is required for every unit of the oil refinery, a charge that has led some European refineries to cut operations, especially in the production of
distilled products.
This has led to a significant decline in global distillate stocks, leading to a premium in the production of diesel and jet fuel
.

Jason Gabelman, Cowen refining analyst, said: "Geopolitical developments should support gas spreads for U.
S.
refiners, but first-quarter gains are likely to be less pronounced
compared to future quarters.
" "

However, a backlog of refinery repairs and soaring crude prices could limit the already strong profits
of some plants.
Analysts downgraded Phillips66 and PBFEnergy (PBF.
US), in part due to spring maintenance
.

Refinery feedstock costs soared in the first quarter as global benchmark Brent crude averaged nearly $
98 a barrel in the first three months of the year, according to OPEC data.
This is up about $
18 from the last three months of 2021.

According to the U.
S.
Energy Information Administration (EIA), the cost of raw materials heading into the summer looks increasingly uncertain
.

"Actual price outcomes will depend on existing sanctions imposed on Russia, any possible future sanctions, and the extent to
which independent corporate actions affect Russian oil production or the sale of Russian oil on global markets," the EIA wrote in its short-term energy outlook.