Energy Market Highlights Q4

Energy markets are ticking quietly higher to end the week, with a major question mark this weekend of what will be included in the tariff’s that have been threatened against Canada and Mexico? The US refining industry is hugely (bigly?) reliant on Canadian oil imports and exports of refined products to Mexico, so any change to those policies has the potential to create waves in supply chains, but at this point the best anyone can do is guess at what might happen.

It’s the last day of January, and expiration day for the February RBOB and ULSD contracts. Take a look at the ticker below to see a good example of why expiration day trading is particularly volatile, with hours passing without a single trade, which is why those remaining markets that aren’t already pricing on the March futures contract (Group 3 and NYH) need to look to the RBH and HOH contracts for price direction today.

Q4 earnings Info:

Valero’s Q4 earnings release showed the expected drop in refining margins year on year of nearly 73%, while ethanol earnings were down nearly 90%. A bright spot in the release was the Renewable Diesel segment which doubled its earnings from a year ago, which was aided by both a tight RD market on the West Coast to end the year, and the start up of their SAF conversion project during the quarter. Perhaps most notable is the reported net loss on refining operations on the West Coast, even though the crack spreads in that region are higher than all the others, reflecting some of the numerous challenges of operating in California. The company also picked up $79 million in tax credits after earning IRS approval to register some of its ethanol production as cellulosic. See tables below.

Exxon reported another strong quarter with record oil production in Guyana and the Permian helping to offset a 69% drop in refining margins.

Chevron also demonstrated the benefits the integrated oil companies are having reporting another solid quarter lead by record output that more than offset a $750 million decline year on year in their refining income.

P66 managed to eke out an $8 million profit in Q4, despite its refining operations losing more than $750 million in the quarter, which included a $230 million write down on its assets in California with the pending closure of its LA refining complex at the end of the year. Similar to Valero, P66 enjoyed better renewable margins in Q4 thanks to tight supplies, but with the loss of the BTC in 2025 we expect to see a sharp drop in those earnings in Q1.