July 24, 2025 [Reuters]- Investors are expecting top U.S. refiners to report higher second-quarter profits, bouncing back from losses during the first three months of the year as unseasonably strong diesel margins boost earnings.

Fuelmakers have reaped unexpected profits from producing key products in recent months, a respite after earnings slipped from record levels in 2022, when a recovery in demand following the COVID-19 pandemic and Russia’s invasion of Ukraine lifted prices.

Some forecasting groups had anticipated weaker margins this year as demand was expected to slow. While analysts expect a recovery from the previous quarter, profits are likely to be weaker than a year ago.

“Refiners are up 20% year-to-date, with surprising counter-seasonal diesel crack strength supporting the group,” said TD Cowen analyst Jason Gabelman. Product margins could potentially hold at elevated levels until autumn maintenance, Gabelman said.

Diesel cracks averaged $17 per barrel during the second quarter, in line with the first quarter, but ended the three-month period higher at $21 per barrel, TPH & Co analyst Matthew Blair said in a note.

U.S. distillate inventories reached five-year lows in early May thanks to strong exports and improving demand, which supported margins, Blair said.

U.S. refinery distillate yields have also been low, likely due to a lighter crude slate.

Valero, the second-largest U.S. refiner by capacity, is set to kick off refiner earnings on Thursday, with analysts forecasting a profit of $1.75 per share, down from $2.71 per share profit a year ago, according to data from LSEG.

Marathon Petroleum, the top U.S. refiner by volume, is expected to report a per-share profit of $3.28, compared with a $4.12 per share profit a year ago, LSEG estimated.

Phillips 66 is expected to report a profit of $1.69 per share, versus $2.31 per share profit a year ago, according to LSEG estimates.

Both Marathon and Phillips 66 reported losses in the first quarter.