Valero cruises past profit estimates as fuel demand soars

FILE PHOTO: The Valero refinery next to the Houston Ship Channel
The Valero refinery next to the Houston Ship Channel is seen in Houston, Texas, U.S., May 5, 2019. REUTERS/Loren Elliott/File Photo

Jan 27 (Reuters) - U.S. refiner Valero Energy Corp (VLO.N) posted quarterly earnings well above Wall Street expectations on Thursday, as margins nearly tripled on the back of soaring demand for fuel thanks to a vaccine-induced economic recovery.

Gasoline and distillate consumption in the United States improved drastically in the last quarter of 2021, compared with the year-ago period, as more people commuted to offices and took to holiday travel on easing coronavirus curbs.

A jet fuel recovery and low product inventories from years of refinery shutdowns combined to nearly triple Valero's fourth-quarter refining margins to $3 billion from a year earlier, Valero Chief Executive Office Joe Gorder said on a post-earnings call.

The refining segment's adjusted operating income was $1.1 billion, compared with a loss of $476 million in the year-ago period, portending bright scenarios for peers Marathon Petroleum (MPC.N) and Phillips 66 (PSX.N) that are yet to report results.

Gasoline demand has returned to 2019 levels, Valero executives said, adding that the company is "very bullish" on the fuel.

Jet fuel demand, however, "will be the unknown", senior executive Gary Simmons said. The company expects domestic air travel to pick back up "fairly rapidly" but international travel may take longer.

Shares in the company were marginally up at midday.

San Antonio, Texas-based Valero's total refinery throughput volumes averaged 3 million barrels per day in the quarter, 483,000 bpd higher than a year earlier. It forecast current-quarter throughput slightly below that level.

"We remain optimistic on refining margins with low global light product inventories, strong demand, global supply tightness due to significant refining capacity rationalization, and wider sour crude oil differentials," CEO Gorder said.

Valero reported an adjusted profit of $2.47 per share for the three months ended Dec. 31, higher than analysts' average estimate of $1.84, according to Refinitiv IBES data.

Reporting by Shariq Khan and Arunima Kumar in Bengaluru; Editing by Ramakrishnan M. and Maju Samuel

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