US oil refiners braced for a tough year as investor sentiment turned negative
By Nicole Jao
NEW YORK (Reuters) – Investors are bearish on the U.S. refining sector, citing forecasts of softer oil demand and fears that President-elect Donald Trump may impose tariffs on crude imports.
U.S. refining margins begin to fall in late 2023 as new refining capacity comes online and margins return to normal levels. This led to two-year highs for refiners due to supply shortages during Russia’s invasion of Ukraine and a recovery in demand after the outbreak.
Shares of major refiners have fallen this year, and analysts on average have cut estimates for refiners’ fourth-quarter earnings before interest, taxes and compensation (EBITA) by 24 percent since the start of the quarter. Analyst Matthew Blair said in a note.
Blair pointed to the expansion of gasoline cracks and the easing of persistently low diesel cracks. The spread is the difference between the price of oil and the price of crude oil. Blair cited high refinery utilization.
U.S. gasoline crude, which is based on West Texas Intermediate (WTI) prices, fell to a one-year low of $11 a barrel in December. Ultra-low sulfur diesel futures have easily hit nearly two-month lows of just under $22 a month.
U.S. refinery utilization averaged 90.3% in the fourth quarter, up from 87.6% in the same quarter last year, Tudor, Pickering, Holt & Co. said.
“After a year of negative revisions, analysts continue to lower estimates in 2025 on the back of a weaker forward curve,” Jefferies analysts said in a note.
In the year Valero’s shares are down more than 6 percent in 2024, while rival Philips 66 is down more than 15 percent over that period.
Shares of Marathon Petroleum In 2024, they closed down 8 percent.
Analysts polled by Reuters in January cut their stock price targets for all three refiners.
Weak desire
Signs of slowing economic activity in the US and China, the biggest oil consumers and importers, weighed heavily on oil and gas markets last year.
According to the US Energy Information Administration, the US is the world’s largest exporter of motor gasoline.
The International Energy Agency Global oil demand growth forecasts for 2025 rose to 1.1 million barrels per day (bpd) in December, up from 990,000 bpd in the previous month. However, he noted that the findings will continue to be led by countries with emerging economies in Asia.
Moreover, global gasoline demand is expected to reach 28 million bpd this year as electric vehicle adoption increases and vehicle efficiency improves, especially in China, the world’s largest oil importer, according to S&P Global Commodity Insights.