Valero Energy's Quarterly Profit Slips on Weak Fuel Prices
(Reuters) — Valero Energy reported a fall in quarterly profit on Thursday, kicking off earnings for U.S. refiners on a feeble note, as a slowdown in fuel demand hurt margins.
Weaker economic activity and an increase in global refining capacity last year pulled back refining profits from record heights touched in 2022, when disruptions to global supplies following Russia's invasion of Ukraine had driven up fuel prices.
San Antonio, Texas-based Valero said its refining margins for the fourth quarter fell to $3.55 billion from $6.32 billion a year ago.
But the refiner said heavy maintenance activities in the near term would provide support to refining margins, ahead of the summer driving season.
The U.S. energy firm's 14 refineries are scheduled to operate between 83% and 86% of their combined total throughput capacity in the first quarter.
Valero said it has also seen a spike in freight rates due to the Red Sea attacks, with the cost of transporting crude from the U.S. Gulf Coast to Northwest Europe surging almost three times.
"It gives us a crude cost advantage versus our global competitors," Chief Operating Officer Gary Simmons said in a conference call.
Valero said its throughput capacity utilization was 94% in the fourth quarter.
Its total refinery throughput volumes averaged 3 million barrels per day in the quarter, marginally lower than last year.
U.S. refiners were operating at 93% utilization in recent weeks to meet seasonal distillates demand, which spikes in winter due to heating needs and make up for downtime during the fall.
Valero's net income fell to $1.2 billion, or $3.55 per share, for the three months ended Dec. 31, compared with the year earlier, but beat LSEG estimates of $2.96 per share.
Analysts attributed the beat to stronger-than-expected margins in its North Atlantic operations and ethanol business.
Valero said it expects 2024 capital investments to be about $2 billion.
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