(Reuters) - Phillips 66 (PSX.N) joined larger rival Valero Energy Corp (VLO.N) in saying that refiners are expected to process less crude in the second half of the year as margins shrink due to a gasoline glut.
Phillips 66’s profit halved in the second quarter as earnings from its refining business plunged 75.3 percent.
“My personal view is we’ve got a lot of inventory stacked up,” Chief Executive Greg Garland said on a post-earnings call. “I think the industry’s going to be facing run cuts in the second half of the year.”
However, Garland added that demand for refined products had been strong.
Phillips 66 said its refineries are expected to function at a mid-90 percent capacity in the current quarter, compared with the 100 percent utilization it reported in the second quarter.
Refining margins, the difference between the cost of crude and the price of refined products, have also been hit by a rise in global crude LCOc1 prices, which touched an eight-month high in June.
Smaller rival Alon USA Energy Inc ALJ.N said on Friday it expected to continue processing less crude at its Krotz Springs Refinery in Louisiana.
Alon’s operating margin from the refinery more than halved to $3.96 per barrel in the quarter.
Phillips 66’s refining margin was $7.13 per barrel in the quarter, well below $8.22 per barrel estimated by Wells Fargo Securities analysts.
Phillips 66’s consolidated earnings fell to $496 million, or 93 cents per share, in the second quarter from $1.01 billion, or $1.84 per share, a year earlier.
However, the company’s adjusted profit of 94 cents per share edged past the average analyst estimate of 93 cents, helped by strong earnings from its chemical, and marketing and specialties businesses.
Shares of Phillips 66 were down 0.6 pct at $75.82 in afternoon trade. They fell as much as 3.2 percent earlier in the session.
Reporting by Arathy S Nair in Bengaluru; Writing by Swetha Gopinath; Editing by Maju Samuel and Anil D'Silva