“We’re going to see some upward pressure on product pricing… into the third quarter and perhaps beyond that,” Chevron CEO Mike Wirth said during an earnings call, adding that demand for distillates including diesel and heating oil is unlikely to decline over the long term. The rising margins and subsequent profits are occurring as U.S. gasoline prices crossed $4 a gallon again last week, presenting a political challenge for President Donald Trump and the Republican Party that will be campaigning to hold onto majorities in Congress in the November midterm elections. The biggest U.S. oil majors say they are doing everything they can to keep output high.
HIGH PRODUCTION
Exxon said it ran its U.S. refineries at high capacity and had a record second quarter for diesel production, while Chevron said it had record throughput at its U.S. refineries of more than 1 million barrels per day.
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Still, Exxon CEO Darren Woods said it is critical that shipping resumes through the Strait of Hormuz to supply more crude to the market.
“The utilization that we’ve seen can’t be sustained for the long term. So I think this refining challenge is going to be with the world for a while,” he said on CNBC.
Woods added that the company has the largest refining footprint in the world outside of China, and the disruption to crude supplies added difficulties to the downstream business. Refiners must complete necessary maintenance, and Chevron said downtime in the third quarter was expected to hit downstream earnings by $175 million to $225 million.
Exxon said scheduled maintenance would be lower during the third quarter compared with the previous three months.
While Exxon’s adjusted downstream earnings rose to $4.1 billion, some investors may have expected Exxon to report even stronger refining results given its large refinery footprint, RBC Capital Markets analyst Biraj Borkhataria said in a research note.
Exxon narrowly missed consensus estimates for second-quarter earnings, while Chevron surpassed expectations. Exxon shares were down 1%, while Chevron was up about 2%.
(Reporting by Sheila Dang in Houston; Editing by Nathan Crooks and Rod Nickel)
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