Valero and US Refiners Expected to Report Record Earnings as Global Fuel Supply Tightens

Major US oil refiners, including Valero Energy (NYSE:VLO), Marathon Petroleum (NYSE:MPC) and Phillips 66 (NYSE:PSX), are expected to report substantially higher third-quarter earnings as disruptions to global fuel production support refining margins.

Analysts anticipate that the three companies could exceed their near-record second-quarter profits, benefiting from shortages of refined petroleum products linked to conflicts in the Middle East and Ukraine.

The tightening supply environment has allowed refiners to benefit from fuel prices rising more rapidly than crude oil costs, widening the margins available from processing crude into products such as petrol and diesel.

The companies are scheduled to release their quarterly results in late October and early November, when investors will be assessing the extent to which stronger refining conditions have translated into higher profitability.

Valero Earnings Forecast to Exceed Previous Quarterly Record

JPMorgan analysts estimate that Valero Energy could generate $8.95 billion in pretax earnings during the third quarter.

The forecast represents an increase of approximately 50% compared with the preceding three-month period and would exceed the company’s previous quarterly record, established in mid-2022, by 24%.

If achieved, the result would mark a significant improvement in profitability for one of the largest independent refining companies in the United States.

Marathon Petroleum is also expected to benefit from stronger market conditions.

Piper Sandler forecasts that Marathon’s earnings per share could increase more than sevenfold compared with the corresponding period last year.

Meanwhile, Phillips 66 is projected to report refining earnings above its previous record.

The forecasts reflect expectations that reduced global fuel availability and elevated refining margins will support earnings across the sector.

However, the figures remain analyst estimates, and actual results will depend on refinery operations, processing volumes, operating expenses and realised product margins.

Refining Margins Expand as Fuel Prices Outpace Crude Oil

A principal factor supporting refiners’ earnings is the widening difference between crude oil prices and the market value of refined petroleum products.

This difference, commonly known as the crack spread, is an important indicator of potential refining profitability.

When petrol, diesel and other fuel prices increase more quickly than the cost of crude oil, refiners can generate higher margins on the products they manufacture.

For Valero’s Gulf Coast operations, the average spread between crude oil acquisition costs and refined fuel prices reached $47.11 per barrel during the third quarter.

That compares with $30.28 per barrel in the previous three-month period, representing a substantial increase in the potential margin available from refining operations.

The rise reflects growing pressure on global fuel supplies as demand competes for reduced production capacity.

US diesel prices have also increased sharply, recently reaching a reported national average record of $6.53 per gallon.

Higher diesel prices affect transportation, agriculture and industrial operations, potentially increasing costs across the wider economy.

For refiners, however, stronger selling prices can support revenue and profitability when they exceed increases in crude oil and operating costs.

Conflicts in Ukraine and Middle East Disrupt Global Refining Capacity

The tightening fuel market has been driven partly by disruptions to refining infrastructure associated with ongoing geopolitical conflicts.

Since late July, Ukraine has targeted approximately 15 Russian oil-refining facilities, according to the reported estimates.

The attacks have taken nearly 2 million barrels per day of refining capacity offline, reducing the volume of petroleum products available from Russian facilities.

Disruptions linked to the conflict in the Middle East have added further pressure to international energy markets.

At the same time, China and other Asian countries have reduced exports of refined petroleum products, limiting the availability of fuel in international markets.

These developments have increased the importance of US refining operations as a source of supply for overseas customers.

According to Industrial Info Resources, approximately 12.1% of global refining capacity was offline as of September.

The combination of disrupted production and reduced exports has contributed to tighter fuel availability and stronger refining margins.

Nevertheless, the duration of these conditions remains uncertain and will depend on developments affecting international supply, refinery operations and demand.

Refining Stocks Reach Record Levels Following Strong Gains

Investor expectations of higher earnings have contributed to substantial gains in shares of major US refiners during 2026.

Valero, Marathon Petroleum and Phillips 66 all closed Thursday’s trading session at record share prices.

The three companies have more than doubled in value during the year, adding approximately $224 billion to their combined market capitalisation.

The gains reflect expectations that unusually strong refining margins could support earnings and cash generation.

However, refining profitability is cyclical and can change rapidly as fuel supply, crude oil prices and product demand adjust.

A recovery in disrupted refining capacity or an increase in international fuel exports could reduce the spreads currently supporting the sector.

Investors will therefore be looking beyond headline earnings to assess management commentary on future refining margins and market conditions.

White House Discusses Refining Capacity Ahead of Midterm Elections

The rise in fuel prices has also attracted attention from the US administration.

Last month, President Donald Trump’s team invited executives from US refining companies to the White House to discuss options for increasing domestic refining capacity ahead of November’s midterm elections.

The discussions took place against a backdrop of elevated fuel costs and concerns about the availability of refined petroleum products.

Increasing refinery output could help address supply shortages, although expanding processing capacity may require additional investment, maintenance planning and regulatory approvals.

The extent to which US refiners can increase production in the near term will depend on existing capacity, operational constraints and access to crude oil supplies.

For Valero, Marathon Petroleum and Phillips 66, the immediate focus remains on their upcoming quarterly financial results.

Analysts expect the companies to benefit from historically strong refining conditions, but the sustainability of those earnings will depend on how quickly global fuel supply recovers and whether elevated product margins persist.

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