Phillips 66 says refiners to cut production as margins shrink
(Reuters) Phillips 66 seconded rival Valero Energy Corp.’s statement that refiners are expected to process less crude in the second half of the year as margins shrink due to a gasoline glut.
Phillips 66's profit halved in the second quarter as earnings from its refining business plunged 75.3%.
"My personal view is we've got a lot of inventory stacked up," Chief Executive Greg Garland said on a post-earnings call. "I think the industry's going to be facing run cuts in the second half of the year."
However, Garland added that demand for refined products had been strong.
Phillips 66 said its refineries are expected to function at a mid-90% capacity in the current quarter, compared with the 100% utilization it reported in the second quarter.
Refining margins, the difference between the cost of crude and the price of refined products, have also been hit by a rise in global crude LCOc1 prices, which touched an eight-month high in June.
Smaller rival Alon USA Energy Inc. said it expected to continue processing less crude at its Krotz Springs Refinery in Louisiana.
Alon's operating margin from the refinery more than halved to $3.96/bbl in the quarter.
Phillips 66's refining margin was $7.13/bbl in the quarter, well below $8.22/bbl estimated by Wells Fargo Securities analysts.
Valero Energy Corp., Marathon Petroleum Corp. and BP Plc. all reported a fall in refining margins for the period.
Reporting by Arathy S. Nair; Writing by Swetha Gopinath; Editing by Maju Samuel and Anil D'Silva
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