Barron’s Senior Energy Writer Laura Sanicola and OPIS Chief Oil Analyst Denton Cinquegrana discuss what’s ahead for oil this week.

Watch this week’s episode for insights into how US refiners are reacting to fourth-quarter earnings, what 2025 could bring for gasoline and diesel demand, as well as changes that could be coming to renewable fuels tax credits for refiners.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider. And joining me again this week is Denton Cinquegrana, chief oil analyst at OPIS. Denton, thanks again for being with us.

DENTON CINQUEGRANA: Hi, Laura. Thanks for having me again.

SANICOLA: So, US refiners started reporting fourth-quarter earnings, which is giving us a bit of insight into what they think 2025 oil demand is going to look like. What has been the big takeaway so far?

CINQUEGRANA: Well, I think we’re gonna find out during the fourth quarter earnings calls that a lot of refiners are going to wish 2024 never even happened, especially the fourth and third quarters.

Margins are sharply lower than what they were at the end of 2023 in the third and fourth quarters as well. But there does appear to be a little bit of positivity rolling forward.

Gasoline demand and diesel demand are, you know, kind of flat to a little bit higher to start the year. So January is usually a tough month for gasoline demand. So if it’s even flat with other years and not falling off, that’s usually a pretty good sign.

We suspect that gasoline demand for the full year might be flat to even a little bit better than 2024. And the cold weather we got in parts of the country are we’re definitely supported for diesel. So diesel’s probably going to be a little bit better and flat again to last year. And part of that might be because you’re not seeing as much renewable diesel come into the market.

SANICOLA: That’s right. Biofuels took up a big part of the diesel pool this year. But I noticed on Valero’s earnings call that they mentioned that the changes to the tax subsidy that renewable diesel gets is expected to make it less profitable to produce next year. What does that mean for refiners?

CINQUEGRANA: That’s correct. So in the past, you would get a dollar per gallon tax credit for blending biodiesel, renewable diesel, sustainable aviation fuel. Now with the 45Z production credit, which, again, is still up in the air a little bit for the Trump administration, but those credits aren’t gonna be as lucrative, if you will. And they’re kind of on a carbon intensity sliding scale. Instead of just getting a dollar per gallon, you might only get 22 cents a gallon. So, could be a pretty big change. It could defer some renewable diesel to more petroleum based diesel, which, again, at the end of day for your traditional petroleum refiners, is probably a good sign.

SANICOLA: That’s right. Only a few US refiners have significant renewable fuel capability. I’m thinking Valero, Phillips 66, and Marathon to an extent in California.

So this spells better news for them this year as they’re, trying to make more profits off their petroleum diesel, coming off a rough 2024. Alright. Well, we’ll keep an eye out for more earnings, and talk again next week.