Valero expects margins to stay high after profit beats estimates

Jan 26 (Reuters) - Valero Energy Corp (VLO.N) said product margins will stay elevated after it zoomed passed Wall Street estimates for quarterly profit on Thursday, wrapping up the refiner's best year on record, boosted by higher demand for fuel amid tight crude supplies.

U.S. refineries operated at record levels last year, aided by a quick recovery in domestic sales and strong exports demand following Russia's invasion of Ukraine.

"Looking ahead, we expect low product inventories and continued increase in product demand to support margins, particularly for U.S. coastal refiners," Chief Executive Officer Joseph Gorder said on a call with analysts.

The company, whose shares rose more than 1%, also said it expects year-over-year demand to outpace new refinery capacity coming in from China.

"We're not too concerned about it ... some of the big refineries in China, it's less than 50% total gasoline, jet and diesel yield, a lot more petrochemicals and fuel oil production," Chief Commercial Officer Gary Simmons added.

Valero's refineries operated at 97% capacity utilization rate in the fourth quarter, the highest since 2018 while refining margins more than doubled to $6.3 billion from a year earlier.

U.S. refiners last year drew criticism from President Joe Biden, who said refiners were putting profits ahead of consumers and urged them to expand capacity.

Valero, the second-largest U.S. refiner by capacity, said quarterly refining throughput volumes averaged 3.04 million barrels per day (bpd), slightly above the year-ago quarter.

The company also said its DGD project adjacent to Port Arthur refinery in Texas, with a production capacity of 470 million gallons per year of renewable diesel, was commissioned and started operations in the fourth quarter.

Valero added going forward it would like to return to a dividend growth pattern.

Its quarterly adjusted income of $8.45 per share topped analysts' average estimate of $7.37 per share, according to Refinitiv data.

Reporting by Arunima Kumar in Bengaluru Editing by Vinay Dwivedi

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