Refinery margins lower through early 2017: Phillips 66

US refining margins may not recover before the second half of next year, Phillips 66 chief executive Greg Garland said today.

The industry has worked to climb out from under large refined product inventories built up last winter amid steep contango in both summer gasoline and Brent crude prices. Unseasonably strong production in the first quarter helped to tamp down profits despite record gasoline demand over the summer, based on Energy Information Administration (EIA) records.

"Even though it is going in the right direction today, I think it's going to take a while before it's through," Garland said. "I think it is going to be the back half of the year before we see margin improvement in the refining business."

Midcontinent and light sweet refining margins will be the slowest to recover, the company said.

US gasoline inventories last week fell to 226mn bl, down from a mid-February high of 256mn bl. Stockpiles were 3pc higher than the same week last year and 8.7pc higher than the ten-year average, according to the EIA.

Total distillates volumes fell to 152.4mn bl, still 6.8pc higher than the same week of 2015 and 8.9pc higher than the ten-year average.

Many US refining executives have noted that the lack of contango this year — and the pain of deep stockpiles through 2016 — will discourage the overproduction seen last winter.

Phillips 66 boosted heavy crude processing during the third quarter following work at its 356,000 b/d Wood River refinery in Roxana, Illinois. The company operates the refinery in a joint venture with Canadian integrated firm Cenovus.

Work was underway to allow its 60,000 b/d refinery in Billings, Montana, to run entirely on heavy crude.

Phillips 66 reported a $556mn profit for the quarter, down from $1.6bn in the same quarter of 2015.