Sure, you've heard of falling through the cracks. But rising through the cracks? It's a less common feat, unless you're a refiner like Valero Energy
For the quarter, Valero ran slightly less crude oil through its refineries, because of above-average outages. Low industrywide capacity utilization fed supply uncertainties, helping to prop up throughput margins, which ran at more than $18 per barrel. That's 16% higher than last year's then-record quarter.
There's obviously some bad news afoot, if you look at the movement of the stock price in recent sessions. It shouldn't be news to anyone that crack spreads are volatile, but they've definitely fallen fast enough in recent weeks to give observers a bit of whiplash. The culprit? Refiners are getting their act together and producing more gasoline. Crude oil prices keep hitting new highs, while the price of gasoline steadily ebbs from its late-May peak. Cracks have thus contracted like the pupils of a victim in a slasher flick.
Just as Fording Canadian Coal
Wackiness aside, Valero isn't headed for the poorhouse just because its cracks are narrowing. As management noted on the call, the firm's profitability is still historically excellent. Like ConocoPhillips