High refining margins and fuel demand in the second quarter are set to lead to exceptional earnings at Big Oil’s refining businesses.
Some of the largest international oil majors have already announced expectations of blockbuster earnings from their refining divisions when they report Q2 profits later this month.
The latest company to preview blockbuster earnings in refining was France’s supermajor TotalEnergies, which said on Friday that “Refining & Chemicals results are expected to be exceptional given the very high levels of distillate and gasoline cracks.”
TotalEnergies’ variable cost margin across its European refining business jumped to $145.70 per ton in the second quarter, more than three times the $46.3 per ton margin for the first quarter of this year.
“Performance of the gas, LNG and power trading activities is expected to remain high, but without replicating the exceptional contribution of the first quarter of 2022,” TotalEnergies added.
Shell also said last week that its indicative refining margin—an approximation of Shell’s global gross refining unit margin—surged to $28.04 per barrel in the second quarter, compared to $10.23 barrel in the first quarter of 2022.
The nearly tripled refining margin is expected to add between $800 million and $1.2 billion to the second quarter results of Shell’s Products division, compared to the first quarter 2022.
On July 1, ExxonMobil said in an SEC filing that the rise in industry margins is set to add between $4.4 billion and $4.6 billion to its Q2 results. The change in the value of unsettled derivatives would add another up to $900 million to Exxon’s earnings for the second quarter.
So, Big Oil will be reporting in the last week of July another quarter of blockbuster earnings, this time aided by record refining margins as refining capacity globally is constrained, crude prices rallied in Q2, and fuel demand rebounded strongly.
Record refining margins and high earnings at the biggest oil corporations have been under continuous criticism by President Joe Biden and his Administration who have been warning firms against “profiteering” while gasoline prices hit records last month.