Executives at Valero Energy Corp. have announced a substantial increase in refined product sales in the current October-December quarter, with expectations of continued strong demand and fuel exports in the United States until the end of 2023.

Solid Year-to-Year Sales Growth

During Valero's recent earnings call, Chief Operating Officer Gary Simmons revealed that gasoline sales were up 2% and diesel sales were up 8% compared to the previous year. These impressive figures demonstrate the company's sustained sales growth. Additionally, Valero's refineries have been operating at a high utilization rate, averaging 95% in the third quarter, which is exceptional for an independent refinery operator.

Simmons highlighted the recovery of wholesale system sales after a slight decline following Labor Day, now reaching a daily volume of 1 million barrels. Notably, Valero achieved record-breaking wholesale volumes in May and June, surpassing 1 million barrels per day.

Factors Affecting Gasoline Prices

Discussing the decline in gasoline prices, Simmons attributed the trend to various factors. These include the transition from summer to winter RVP (Reid Vapor Pressure), which influences gasoline volatility. He also mentioned the Energy Information Administration's conservative demand estimates and the conclusion of the Atlantic Hurricane season as contributing factors.

Outlook on Gasoline Cracks and Refining Margins

Simmons expects gasoline cracks to remain weak in the fourth quarter and first quarter, adhering to typical seasonal patterns. However, refining margins are anticipated to rebound as demand increases during next year's summer driving season. This bodes well for Valero's future profitability.

Strong Exports Across Continents

Valero has achieved impressive export figures, with a total of 389,000 barrels per day during the third quarter. This comprised 281,000 barrels per day of distillates and 108,000 barrels per day of gasoline. The majority of Valero's exports, approximately 70%, were shipped to Latin America, while the remaining 30% went to Europe. These export sales and destination trends have remained steady in the current fourth quarter.

Valero Energy Corp. continues to thrive with robust sales, promising exports, and a positive outlook for the future.

Valero Remains Unfazed as Mexico Cracks Down on Illegal Fuel Imports

Valero's General Counsel, Richard Walsh, expressed confidence that a recent Mexican decree aimed at curbing illegal fuel imports will not affect the company. According to Walsh, Valero is diligently adhering to all regulations, importing their refined products into Mexico while paying the appropriate tariffs.

The Mexican government recently introduced temporary restrictions on the import of various petrochemical and refined products to combat fuel theft and blending adulteration. These measures, detailed in an official decree published in Mexico's Official Gazette, aim to tackle rampant illegal practices in the industry.

During a conference call, Valero's Chief Executive, Lane Riggs, addressed inquiries about the company's potential interest in acquiring a refinery. Riggs acknowledged that Valero is well aware of the costs and requirements involved in assimilating an asset into its system. He also noted that Valero must carefully evaluate capital spending for potential mergers and acquisitions in comparison to other uses, such as stock buybacks.

Riggs emphasized that Valero has not made any significant refinery purchases since 2013 but did not rule out future acquisitions. He stated that the company will thoroughly assess all opportunities and analyze their alignment with Valero's objectives.

Apart from its refineries, Valero operates downstream assets in the U.S., Canada, and the U.K., including plants for ethanol and renewable diesel production.

Reporting by Frank Tang; Editing by Michael Kelly.

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