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Valero Energy Expects Strong U.S. Refining Margins in First Quarter


Valero Energy anticipates that U.S. refining margins in the first quarter will be buoyed by reduced supply caused by several turnaround projects leading up to the busy summer driving season. During a recent conference call discussing the company’s fourth-quarter financial results, executives expressed optimism regarding near-term gasoline and diesel margins due to robust domestic demand and favorable export volumes.

Limited Inventories Ahead of Summer Driving Season

Executive Lane Riggs informed analysts that product inventories are expected to be restricted in the near term as heavy industry-wide turnaround activity takes place in the first quarter. This constraint is expected to provide support for refining margins as the summer season approaches. U.S. refiners traditionally conduct maintenance work during the fall and winter months when demand is lower, aiming to minimize operational issues during the peak driving period.

Wintry Weather Impacts Gasoline Volumes

Gary Simmons, Valero’s Chief Operating Officer, acknowledged that wholesale gasoline volumes in the first quarter so far have experienced a slight decline compared to the previous year. This decrease can be attributed to wintry weather conditions suppressing demand. However, Simmons highlighted that gasoline exports to Mexico and Latin America have remained stable, while gasoline markets in Europe have remained relatively strong.

Valero Energy remains positive about the outlook for refining margins, banking on constrained supplies and robust demand to support their business in the coming months.

Healthy Exports Boost Fuel Cracks, Promising Outlook for Gasoline

Valero Energy Corp has expressed optimism for gasoline cracks as the driving season approaches, citing healthy exports as a key factor. Despite warm weather in Europe affecting demand, Valero’s Chief Commercial Officer, Gary Simmons, assured analysts of an upturn in European demand due to colder temperatures.

Simmons also highlighted the growing demand for diesel on Valero’s system this quarter, which is currently surpassing last year’s figures by approximately 7%. This increase can be attributed to low inventories and stronger heating demand in the United States and Europe.

However, Valero experienced a decline in diesel exports during the fourth quarter due to changes in trade flow involving higher Russian supply to South America. Consequently, the company shifted its focus to the European market.

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