U.S. Refiners' Q1 Earnings Review and Outlook
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Source: Yahoo Finance
- Strong Earnings Recovery: Valero Energy reported Q1 2026 earnings of $4.22 per share, a significant turnaround from a loss of $1.90 per share in Q1 2025, indicating robust recovery in refining operations, although adjusted profit of $0.89 per share reflects ongoing market demand improvements.
- Marathon Petroleum's Bright Performance: Marathon Petroleum achieved Q1 2026 earnings of $1.73 per share, with adjusted earnings of $1.65, significantly up from a loss of $0.24 per share in Q1 2025, showcasing a gradual return to profitability despite a drop from the previous quarter's $4.07.
- Phillips 66's Challenges: Phillips 66's Q1 2026 adjusted earnings were $0.49 per share, a notable improvement from a loss of $0.90 per share in Q1 2025, yet a substantial decline from $2.47 in Q4 2025, highlighting profitability pressures amid high oil prices.
- Geopolitical Impact Intensifies: The ongoing Middle Eastern conflict has driven oil prices higher, with Phillips 66 reporting an $839 million mark-to-market loss from hedging activities in Q1, indicating the adverse effects of elevated energy costs on refining operations, prompting investors to carefully assess short-term trading risks.
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Analyst Views on VLO
Wall Street analysts forecast VLO stock price to fall
17 Analyst Rating
11 Buy
6 Hold
0 Sell
Moderate Buy
Current: 244.850
Low
149.00
Averages
186.56
High
223.00
Current: 244.850
Low
149.00
Averages
186.56
High
223.00
About VLO
Valero Energy Corporation, through its subsidiaries, is a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products. The Company sells its products primarily in the United States (U.S.), Canada, the United Kingdom (U.K.), Ireland, and Latin America. It operates through three segments, which include Refining, Renewable Diesel, and Ethanol. The Refining segment includes the operations of its petroleum refineries, the associated activities to market its refined petroleum products, and the logistics assets that support its refining operations. The Renewable Diesel segment represents the operations of Diamond Green Diesel (DGD), and the associated activities to market low-carbon fuels, renewable diesel, renewable naphtha, and neat sustainable aviation fuel (SAF). The Ethanol segment includes the operations of its ethanol plants and the associated activities to market its ethanol and co-products.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Consumer Cost Mitigation: The revised plan includes approximately $800 million in support aimed at preventing additional costs from being passed on to consumers, particularly as policymakers face inflationary pressures amid rising gasoline prices due to Middle Eastern conflicts.
- Opposition from Environmental Groups: While CARB defends the changes as not undermining climate policy effectiveness, environmental groups and economists warn that the additional allowances could weaken incentives to reduce emissions and hinder California's goal of carbon neutrality by 2045.
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- Resource Development Plan: Sky Quarry issued a Request for Proposals for its PR Spring oil sands asset, targeting the development of approximately 180 million barrels of oil and integrating heavy oil production directly into the Foreland Refinery, creating a vertically integrated pathway that enhances market competitiveness.
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See More
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- New Carbon Market Regulations: The California Air Resources Board has approved revisions to its carbon market program, potentially providing up to $4 billion in additional free emissions allowances to oil refiners and industrial companies to help comply with greenhouse gas limits.
- Consumer Cost Mitigation: The revised plan includes approximately $800 million in support aimed at preventing additional costs from being passed on to consumers, particularly as policymakers face inflationary pressures amid rising gasoline prices due to Middle Eastern conflicts.
- Opposition from Environmental Groups: While CARB defends the changes as not undermining climate policy effectiveness, environmental groups and economists warn that the additional allowances could weaken incentives to reduce emissions and hinder California's goal of carbon neutrality by 2045.
- Projected Revenue Decline: The California Legislative Analyst's Office estimates that annual auction revenues could drop from about $4 billion to $2 billion, impacting funding for various state initiatives, including affordable housing and wildfire resilience projects.
See More
Sky Quarry Forms Strategic Partnership with Southern Energy
- Strategic Partnership: On May 7, 2026, Sky Quarry signed a non-binding MOU with Southern Energy Renewables and DevvStream for a three-year collaboration focused on low-carbon fuel development and refinery integration, marking a significant strategic positioning in the energy transition.
- Resource Development Plan: Sky Quarry issued a Request for Proposals for its PR Spring oil sands asset, targeting the development of approximately 180 million barrels of oil and integrating heavy oil production directly into the Foreland Refinery, creating a vertically integrated pathway that enhances market competitiveness.
- Refinery Capacity Enhancement: The Foreland Refinery operates at a capacity of 5,000 barrels per day and has recently completed high-impact system upgrades, unlocking strategic value and supporting Sky Quarry's goal of 800,000 barrels of annual production, thereby strengthening its operational capabilities in the Western market.
- Policy Support Environment: The Trump administration's Defense Production Act prioritizes U.S. refining infrastructure, and Sky Quarry's multi-party collaboration aligns with this policy, ensuring the company maintains a competitive edge in the currently constrained domestic refining market.
See More
Sky Quarry Forms Strategic Collaboration with Southern Energy
- Strategic Collaboration: On May 7, 2026, Sky Quarry signed a non-binding Memorandum of Understanding with Southern Energy and DevvStream for a three-year term, focusing on low-carbon fuel development and refinery integration, marking a significant advancement in the company's low-carbon fuel pathways.
- Resource Development Plan: On April 29, 2026, Sky Quarry issued a Request for Proposals for its PR Spring oil sands asset, aiming to integrate approximately 180 million barrels of heavy oil production directly into the Foreland Refinery, creating a vertically integrated pathway that enhances overall operational efficiency.
- Refinery Capacity Enhancement: The Foreland Refinery operates at a capacity of 5,000 barrels per day, and following high-impact system upgrades, Sky Quarry's strategic growth plan targets up to 800,000 barrels of annual sustained production, further solidifying its position in the U.S. refining market.
- Policy Support Environment: Sky Quarry's operations are bolstered by the Trump administration's policy support under the Defense Production Act, combined with its 180 million barrels of feedstock and multi-party collaborations, creating a structural framework conducive to the company's growth and enhancing its strategic value within domestic refining capacity.
See More
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- Impact of Falling Oil Prices: Crude oil prices dropped over 3% amid optimism for a normalization of oil flows from the Middle East, which not only eased inflation expectations but also pushed the 10-year Treasury yield down to a 1.5-week low of 4.45%, positively affecting the bond market.
- Decline in Mortgage Applications: US MBA mortgage applications fell by 8.5% for the week ending May 22, with the purchase mortgage sub-index down 0.4% and the refinancing sub-index plunging 18.1%, indicating the suppressive effect of high interest rates on the housing market.
- Corporate Earnings Overview: As of now, 83% of the 475 S&P 500 companies that reported Q1 earnings have exceeded expectations, with overall earnings projected to rise by 12% year-on-year, but excluding the tech sector, the growth is only 3%, highlighting disparities across industries.
See More
Trump's Waiver on Shipping Law Fails to Lower Gas Prices
- High Gas Prices Persist: According to AAA data, the national average gasoline price has reached $4.49 per gallon, significantly rising since the onset of the U.S.-Israeli war, indicating that Trump's policy has failed to effectively control inflationary pressures on fuel prices.
- Limited Transport Volumes: Under the waived shipping law, refiners utilized the exemption only about 50 times in the first two months, moving 2.6 million barrels of crude and 7.5 million barrels of gasoline, diesel, and jet fuel, which represents a minuscule fraction of daily U.S. consumption.
- High Shipping Costs: Due to many international tankers being trapped in the Strait of Hormuz, freight rates for foreign-flagged vessels are significantly higher than normal, leading to increased transportation costs and exacerbating inefficiencies in domestic shipping.
- Market Structure Changes: The waiver may lead U.S. tankers to pursue international routes, increasing domestic tanker market tightness, while tax uncertainties deter companies from chartering foreign tankers for U.S. routes, further impacting the domestic supply chain.
See More
Mixed US Stock Market with Energy Stocks Under Pressure
- Market Divergence: The S&P 500 index fell by 0.05%, while the Dow Jones Industrial Average rose by 0.23%, and the Nasdaq 100 index decreased by 0.15%, indicating a divergence in market performance, particularly under the pressure of weak energy and cybersecurity stocks.
- Crude Oil Price Decline: Crude oil prices dropped over 4% to a five-week low amid optimism surrounding a US-Iran peace deal, which has lowered inflation expectations and pushed bond yields lower, with the 10-year T-note yield falling to a 1.5-week low of 4.45%.
- Mortgage Application Decrease: For the week ending May 22, US MBA mortgage applications fell by 8.5%, with the purchase mortgage sub-index down 0.4% and the refinancing mortgage sub-index down 18.1%, indicating the suppressive effect of high rates on the housing market.
- Earnings Performance: As of now, 83% of the 475 S&P 500 companies that reported Q1 earnings have exceeded expectations, with Q1 earnings projected to rise by 12% year-over-year, but excluding the technology sector, earnings growth is only about 3%, marking the lowest in two years, reflecting disparities across industries.
See More
