The top U.S. refiners are expected to report quarterly losses despite improving margins, as investors worry about the ripple effect of President Donald Trump's tariffs on refined products demand.

As a result of the COVID-19 pandemic and Russia's invasion of Ukraine, fuel prices reached record levels in 2022, leading to earnings tumbles for refiners. The first quarter of 2025 saw an increase in margins from last year's multi-year lows; however, seasonal turnarounds and unplanned outages restricted refiners' ability to capture revenues.

Marathon Petroleum, the top U.S. refiner by volume, is forecasted to report a per-share loss of 53 cents, compared with $2.58 per share profit in the previous year, according to LSEG estimates. The Findlay, Ohio-based refiner last reported negative EPS in Q1 2021.

Valero, the second-largest U.S. refiner by capacity, is set to kick off refiner earnings on Thursday, with analysts forecasting a profit of 42 cents per share, down from $3.82 profit a year ago, according to data from LSEG. Phillips 66 is expected to report a loss of 72 cents per share, versus $1.90 per share profit in the previous year, according to LSEG estimates.

Capture Rates Under Pressure

Earnings were under pressure during the quarter due to lower average capture rates, which dropped to 63% in the first quarter from 71% a year ago, according to Tudor, Pickering, Holt & Co analyst Matthew Blair. Capture rates fell partly due to heavy seasonal maintenance, unplanned outages, and tighter crude differentials.

Independent refiner PBF Energy took its 157,000 barrel-per-day (bpd) Martinez, California, refinery offline in February after a fire damaged the units. The fire-damaged units will remain shut until the fourth quarter. PBF is expected to report a loss of $2.91 per share, down sharply from 85-cents profit in the previous year.

However, higher gasoline and diesel futures cracks in the first quarter helped offset some losses. "Globally, there was a 3 million-barrel-a-day loss of availability from the refining sector across the first quarter compared to what we originally were expecting," said Alan Gelder, vice president of refining, chemicals, and oil markets at Wood Mackenzie.

Margins were also aided by the slower-than-expected ramp up of new plants such as Nigeria's Dangote refinery and Mexico's Dos Bocas, he added. "Globally, there was a 3 million-barrel-a-day loss of availability from the refining sector across the first quarter compared to what we originally were expecting," said Alan Gelder.

Demand in Focus

Investors want clarity about how the ongoing trade war between the U.S. and China may impact demand for refined products including gasoline, diesel, and jet fuel, according to TD Cowen analyst Jason Gabelman. Global oil and fuel demand is expected to grow by 900,000-bpd from last year, a drop from its previous expectation of 1.2 million bpd, the U.S. Energy Information Administration said in its latest Short-Term Outlook.

Shares of the top three U.S. refiners fell to their lowest since 2023 in April when U.S. President Donald Trump announced new reciprocal tariffs. Margins have held up better in the refined product space than crude, according to Ben Hoff, head of commodity strategy at Societe Generale. However, the indirect impact of slower economic growth will eventually play out in refined products.

"The question is really not so much if, but when that starts rippling forward and creeping into margins," said Ben Hoff.

Conclusion

The top U.S. refiners are expected to report quarterly losses despite improving margins, as investors worry about the ripple effect of President Donald Trump's tariffs on refined products demand. Earnings were under pressure during the quarter due to lower average capture rates, and global oil and fuel demand is expected to grow by 900,000-bpd from last year.

Investors want clarity about how the ongoing trade war between the U.S. and China may impact demand for refined products including gasoline, diesel, and jet fuel. Margins have held up better in the refined product space than crude, but the indirect impact of slower economic growth will eventually play out in refined products. The question is really not so much if, but when that starts rippling forward and creeping into margins.