By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) ? Tesoro Corp.?s unexpected loss on weaker refining margins cut a negative swath through energy stocks Thursday, with shares of Valero Energy Corp. and Marathon Petroleum Corp. also moving into the red as the sector weakened.
For energy stocks, it marked the first day of hefty losses so far in 2012. The Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.05% ?fell 35 points in midday action as European sovereign-debt woes trumped better-than-expected U.S. economic data.
Euro-zone crisis hits markets again
Nerves remain frayed in spite of respectable if cautious auction results from Germany and France over the last few days, as discussions over haircuts for Greece continue.
Exxon Mobil /quotes/zigman/203975/quotes/nls/xom XOM -0.45% ? and Chevron /quotes/zigman/289939/quotes/nls/cvx CVX -1.23% ?? the two energy-sector components of the 30-stock Dow Jones Industrial Average ? fell by 0.7% and 1.5%, respectively.
Checking the major energy sector benchmarks, the NYSE Arca Oil Index /quotes/zigman/6015539 XX:XOI -1.02% ?dropped 1.2%, the NYSE Arca Natural Gas Index /quotes/zigman/6015474 XX:XNG -0.10% ?dipped 0.2% and the Philadelphia Oil Service Index /quotes/zigman/1470028 OSX -1.46% ?fell 1.1%.
Tesoro /quotes/zigman/243084/quotes/nls/tso TSO -7.08% ?ranked among the worst-performing components of the S&P 500 Index /quotes/zigman/3870025 SPX +0.22% , dropping 7.4%. Valero Energy /quotes/zigman/186158/quotes/nls/vlo VLO -3.33% ?dropped 4.8% as Marathon Petroleum /quotes/zigman/5611608/quotes/nls/mpc MPC -5.54% ?gave up 6.3%.
/quotes/zigman/243084/quotes/nls/tso TSO 22.31, -1.70, -7.08%Tesoro said it expects a fourth-quarter loss of 55 cents to 80 cents a share. Analysts, however, had been looking for the San Antonio-based refiner to post earnings of 74 cents a share for the period, according to the consensus in a survey by FactSet Research.
?Contributing to the net loss was an extremely weak margin environment in California and the collapse of the West Texas Intermediate to Brent crude oil spread,? the company said.
In the year-ago period, Tesoro reported a fourth-quarter loss of 13 cents a share and in the fourth quarter of 2009, Tesoro lost 99 cents a share. Tesoro said it expects to report a 2011 profit of $3.85 to $4.10 a share, lower than Wall Street?s consensus target of $5.49 a share.
Tesoro said its business fell victim to high prices for California crude oil; also a cost advantage of Midwest crude oil used to make gasoline and other products eroded during the quarter.
Up until the fourth quarter, Tesoro, Valero, Marathon Petroleum and others had been boosted by a discount for crude oil because of an artificial glut caused by infrastructure constraints at Cushing, Okla., the delivery point for futures traded on the New York Mercantile Exchange.
That cost advantage narrowed in the later part of 2011, when the relative price of European-based Brent crude futures dropped on increased supply from Libya and the prospects of lower demand tied to the European sovereign debt crisis.
At the same time, pipeline companies have been moving to address infrastructure constraints in Cushing, causing some downward pressure on West Texas Intermediate crude futures, relative to higher-priced Brent crude.
On a positive note, Tesoro said the unusually weak market conditions in California have recently improved. Tesoro said its manufacturing costs, depreciation, corporate and interest expense for the fourth quarter are expected to be in-line with its previously provided targets.
/quotes/zigman/627449
Volume: 97.09M
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/quotes/zigman/203975/quotes/nls/xom Volume: 10.62M
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/quotes/zigman/289939/quotes/nls/cvx Volume: 5.30M
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/quotes/zigman/6015539 Volume: 0.00
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/quotes/zigman/6015474 Volume: 0.00
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/quotes/zigman/1470028 Volume: 0.00
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/quotes/zigman/243084/quotes/nls/tso Volume: 5.47M
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/quotes/zigman/3870025 Volume: 407.46M
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/quotes/zigman/186158/quotes/nls/vlo Volume: 16.07M
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/quotes/zigman/5611608/quotes/nls/mpc Volume: 4.92M
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Steve Gelsi is a reporter for MarketWatch in New York.
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