Valero Energy Sees Wider Margins in 4Q

Valero Energy Expects Wider 4th-Quarter Margins Following Volatile 3rd Quarter

Valero Energy Corp., the nation's largest independent oil refiner, on Tuesday forecast a fourth-quarter return to fatter gasoline margins, following a volatile third quarter that saw margins surge then slide drastically. "In October, gasoline fundamentals improved substantially," said Joe Gorder, Valero executive vice president of marketing and supply, adding that "the November and December forward curve for gasoline continues to strengthen."

Valero also noted that it operates complex refineries that are able to refine heavy, sour crude oil -- which is cheaper than the light, sweet variety. The company expects ample supplies of heavier crudes and better discounts as a result.

On the demand side, President Gregory C. King said that "global refined product supplies have not grown fast enough to 2006 to exceed demand growth, so we expect the market will remain tight next year."

Valero's report "contains a fairly bullish outlook for the refining industry," said JPMorgan analyst Jennifer Rowland, in a note to clients.