Valero Refined 20% Less Oil In Second Quarter Than A Year Ago

U.S. independent refiner Valero Energy
VLO
recorded a net loss of $504 million as demand for gasoline and other key oil products cratered amid the COVID-19 pandemic, becoming the latest in a procession of oil and gas companies to deliver glum second quarter results.

Valero processed 2.3 million barrels per day in the second quarter of this year, 647,000 barrels per day fewer than in the same quarter in 2019.

Refiners thrive on demand for gasoline, jet fuel, and other products that are derived from crude oil in sprawling oil refineries. But even as sales of these products are improving after bottoming out around March when much of the world shut down, demand still isn’t where it used to be as drivers stay home and airlines keep planes on the ground. Stockpiles of fuel for travel are growing. Yesterday the U.S. Energy Information Administration (EIA) reported a surprise drawdown in crude oil inventories across the country, but an increase in gasoline supplies.

U.S. demand for gasoline, representing 10% of global oil demand and a critical component of Valero’s revenue, is down 8% year-on-year, according to recently released Department of Energy data. That is a significant drop, although analysts noted that it could have been much worse, given widespread unemployment and economic sluggishness. Sankey Research, led by oil analyst Paul Sankey, called that data point “super bullish.”

Chief executive Joe Gorder said Valero’s focus would remain on capital discipline and noted signs of growing demand for its products. “While the impact of the pandemic and the ensuing global economic downturn so far this year has been significant, we saw a rapid recovery in demand for refined products as we moved through the quarter,” he said.

For Valero and other refiners, the toughest stretch could still lie ahead. “The main concern is not Q2 2020, but that Q3 is rough so far,” said Sankey Research, noting that as much as 2 million barrels per day (b/d) of refining capacity may need to be shut down in August because of weak refining margins.

By midday on Thursday, Valero’s shares were trading around 6% below their market close on Wednesday.

The world’s largest independent petroleum refiner, Valero owns 15 refineries through its subsidiaries across the U.S., Canada, and the U.K. It has enough capacity to refine up to 3.2 million barrels b/d of oil. (Global oil demand is around 95-100 million barrels per day.)