Key Highlights

  • Marathon Petroleum (NYSE:MPC), Phillips 66 (NYSE:PSX), and Valero Energy (NYSE:VLO) earned combined profits of $12.6 billion in the second quarter, the most since 2022
  • The three refiners returned $6.3 billion to shareholders through Buybacks and dividends, more than double the $2.6 billion returned a year earlier
  • US diesel and gasoline crack spreads hit record levels, with the diesel Crack Spread reaching $93.84 per barrel on August 10
  • Shares of Marathon are up around 110% year-to-date, while Valero has gained more than 98% and Phillips 66 about 75%

Refiners Post Biggest Profits Since 2022 Amid Global Fuel Crunch

Top US fuel makers boosted returns to shareholders in the second quarter as prolonged disruptions to crude supplies through the Strait of Hormuz sent fuel prices and refining margins surging. Three of the largest US independent oil refiners, Marathon Petroleum, Phillips 66, and Valero Energy, earned combined profits of $12.6 billion in the quarter, the most since Russia's invasion of Ukraine in 2022, as the Iran war disrupted global energy shipping and a wave of attacks on Russian oil refineries further tightened fuel supplies.

The three refiners returned $6.3 billion to shareholders through stock repurchases and dividends in the second quarter, the largest amount in more than two years, compared with $2.6 billion returned during the same quarter a year earlier when profits totaled $2.9 billion. Industry analysts expect the strong profits and buyback programs to continue into the third quarter.

Buyback Programs Expand as Margins Hit Records

In July, Phillips 66's board approved a $10 billion increase to its share repurchase program, while Valero Energy authorized a new $5 billion buyback program in addition to remaining capacity under a prior authorization. Smaller rival HF Sinclair raised its quarterly Dividend by 5%. Disruptions that have tightened global fuel inventories have pushed US gasoline and diesel crack spreads, a key measure of refiner profitability, to record levels, with the ultra-low sulfur diesel futures crack spread reaching a record $93.84 per barrel on August 10, and the gasoline futures crack spread hitting its highest level since April 2020 in July.

Year-to-date, shares of Marathon, the top US refiner by volume, are up around 110%, while Valero shares have gained more than 98% and Phillips 66 shares are up about 75%, compared with a 36% increase for the S&P 500 energy sector over the same period.

Executives Cautiously Optimistic Despite Seasonal Headwinds

Refining executives expressed cautious optimism heading into the second half of the year, which typically experiences seasonal weakness as gasoline and heating oil Demand transition between peak summer driving and winter heating seasons. Marathon's chief commercial officer said product margins remain robust but have eased from the stronger levels seen in the second quarter and the early part of the third quarter. Valero's chief operating officer said the company benefited from strong jet fuel margins in the second quarter that have been absent so far in the third quarter, though he noted a reopened arbitrage opportunity for jet fuel exports to Europe is expected to support strengthening margins as refiners shift to winter diesel specifications.