Current earnings estimates fail to take into account up to $600mn in additional refining profits across BP, Shell and TotalEnergies for the fourth quarter of this year thanks to continuing strong momentum in margins, according to Morgan Stanley.
In research published on 16 November, the investment bank noted that the crack spread for diesel has rallied by more than 30pc over the past three weeks on concerns around a disruption to supplies from Russia, following the recent US sanctions imposed on Russian oil companies Rosneft and Lukoil. Major buyers of Russian diesel include Turkey and Brazil, which Morgan Stanley sees potentially reducing their Russian diesel imports by a combined 150,000-200,000 b/d. It said that displaced diesel volumes are unlikely to be absorbed by China or India in the same way that they receive Russian crude as both countries are net exporters of diesel.
Consequently, Morgan Stanley said there is potential for a $600mn increase in consensus post-tax earnings for Shell, BP and TotalEnergies in the fourth quarter, and a $200mn uplift for Repsol. The investment bank issued a caveat for these estimates for earnings increases by noting that companies' ability to capture improved refining margins varies by quarter. In the third quarter, BP and TotalEnergies were able to capture the period's improved margins due to lower maintenance activities at their refineries.
At the same time, as Argus reported on 14 November, gasoline margins have also grown firmer due to the new sanctions that hit Lukoil's refineries in Europe as well as a scramble for cargoes in Nigeria ahead of incoming import tariffs.
