Profits from downstream segment up 95% in first quarter

First-quarter 2015 financial results for globally integrated oil companies—ones that focus on both the exploration and production of crude oil (upstream) and the refining of crude oil into petroleum products (downstream)—show that total earnings were USD 22 billion (54%) lower than in the same period a year ago, according to the U.S. Energy Information Administration (EIA).

Lower crude oil prices contributed to a decline in profits in the upstream sector of USD 28 billion (80%) compared to the first quarter of 2014. Profits in the downstream sector, however, were the largest for any quarter since the third quarter of 2012, almost USD 6 billion (95%) higher than in the first quarter of 2014, which offset some of the decline from the upstream segment.

Crack spreads refer to the differences between wholesale petroleum product prices and crude oil prices, and they can serve as an indicator of refining profits. Crack spreads for gasoline and heating oil (based on futures prices for North Sea Brent crude oil and gasoline and heating oil in New York Harbor) averaged US 28 cents per gallon (gal.) and US 49 cents/gal., respectively, in the first quarter of 2015. These crack spreads represent year-over-year increases of US 7 cents/gal. for gasoline and US 4 cents/gal. for heating oil.

First-quarter earnings statements from 11 global companies show that the high crack spreads during this time contributed to higher profits in the downstream segment. Even though absolute prices for both crude oil and petroleum products declined in the first quarter of 2015 compared to the year ago period, North Sea Brent crude oil prices fell more than wholesale gasoline and heating oil prices, resulting in an increase in the margin from refining crude oil.