Refiner Marathon Petroleum expects strong margins in 2023 on high demand

Refiner Marathon Petroleum expects strong margins in 2023 on high demand
© Reuters. FILE PHOTO: A Marathon Petroleum banner outside the El Paso refinery in El Paso, Texas, U.S., October 1, 2018. REUTERS/Julio-Cesar Chavez/File Photo

By Arunima Kumar

(Reuters) -Marathon Petroleum Corp said on Tuesday it expects strong margins throughout 2023 as demand grows while supply constraints persist, after the top U.S. refiner beat Wall Street estimates for quarterly profit.

Closure of facilities during the pandemic and demand recovery have lifted refiners’ margins, further bolstered by tight crude supplies following Russia’s invasion of Ukraine and a jump in jet fuel demand due to a travel boom.

While CEO Michael Hennigan was optimistic about the company sustaining strong margins, he cautioned that “much will depend on the ongoing recovery in China and … recessionary impacts”.

Marathon refining and marketing margin soared 70.8% to $26.15 per barrel during the January-March quarter, compared with a year earlier.

“While we expect refining profits to decline from record highs … they will likely remain above historical averages given solid product demand and negligible new global refining capacity additions near-term,” Edward Jones analyst Faisal Hersi said.

Following its strong quarterly performance, Marathon also expanded its share buyback programme by $5 billion, bringing its total stock repurchase authorization to $9 billion.

The company said crude capacity utilization was 89% in the reported quarter, lower than last year’s 91% due to planned maintenance activity in the Gulf Coast region.

U.S. oil refiners dialed back operating runs during the quarter due to maintenance activities after solid demand recovery led to sky-high utilization rates last year.

Marathon’s quarterly throughput of 2.8 million barrels per day was largely the same compared with the year-ago period.

For the current quarter, it expects throughput to be 2.86 million bpd.

The company reported earnings per share of $6.09 compared with analysts’ average estimate of $5.74, according to Refinitiv data.

Shares fell 5.7% to $115.54, along with a more than 4% decline in crude prices on worries about a U.S. bond default and weak economic data from China.

Source: Reuters