Valero 2Q15 Earnings Call Notes

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Plenty of pent up demand for gasoline is supporting the price?

“we certainly expected some price demand elasticity for gasoline with the fall in flat price. And we’ve seen that, and we didn’t really know exactly what the magnitude of the pent-up demand would be. And it’s been a very pleasant surprise, and I think we do expect that that response will continue into the future.”

We’re running all of our gasoline producing units at max utilization

“We’re certainly running all of our gasoline producing units at max utilization. We’ve seen good utilization in Europe. And as you’ve mentioned, we’re having trouble keeping up with gasoline inventories. So I think it will be here for an extended period.”

Growth and return of cash aren’t mutually exclusive

“we believe that growth and return of cash to shareholders aren’t mutually exclusive, and I think that we’ve been demonstrating that.”

Production has held up even with the decline in rig count

“I think we’ve been surprised with the decline in rig count, production still seems to be holding. I don’t really know that I can give you much insight whether that will continue or not.”

As the Brent/TI spread narrows, people start importing crude

“The Brent/TI [WTI] spread comes in and incentivizes people to start importing foreign light sweet. As we talked about in the past, the first place we tend to do that is our Quebec refinery, which we did in the second quarter. In fact, the Brent/TI spread got narrow enough that we even took some foreign light sweet into St. James.”

There are a lot of crude inventories and we’re headed into a refiner maintenance period, so you’d expect that to pressure prices

“We’re sitting on a pretty good overhang of crude oil inventory here in the U.S. We’re 90 million barrels above where we were last year. So with that overhang and then heading into a typical maintenance period where refiner demand is down, you would think that that would add pressure on the price of crude oil.”

Export volumes were down a little because domestic markets strong

“Our export volumes of gasoline were down a little bit in the second quarter, and it was primarily just due to the strength of the domestic markets. We exported 76,000 barrels a day of gasoline. Most all of that volume went to Mexico and Latin America.”

More gasoline demand at this lower price

“I think that the big driver for gasoline demand has just been the lower flat price and demand elasticity and the response to the lower flat price. And so I think as long as we’re in this lower price environment, we’ll see good gasoline demand moving forward.”

Strength of west coast will be driven by supply

“Certainly, as you know, as we head out of driving season, demand weakens a little bit, and then you get more butane blending into the pool. That will swell production some. So to me, a lot of what happens on the West Coast will be supply-driven. And some of these refinery outages that we’ve been seeing, will they continue or not will really determine how strong the West Coast market will be.”