Petron Earnings Fall 27% as Middle East Conflict Drives Up Oil Costs

Margins Squeezed Despite Revenue Surge

Petron Corp., the Philippines' only operating oil refinery, reported net income of P3.8 billion for the first six months of 2026, a 27 percent decline from P5.3 billion in the same period last year. Operating income fell 17 percent to P12.6 billion, even as revenues jumped 57 percent to P605.9 billion from P386.4 billion.

The earnings compression came despite strong top-line growth, as product costs and operating expenses rose faster than sales. Global crude markets experienced sharp swings after conflict between the United States and Iran intensified in late February, sending Dubai crude to $129 per barrel in March. While prices retreated below $80 later in the period, the second quarter still saw an average of $96 per barrel, up from $86 in the first quarter.

Chairman and CEO Ramon Ang said the company remains focused on financial discipline and operational resilience to weather what he described as temporary market headwinds. Petron operates a 180,000-barrel-per-day refinery in Bataan, the country's last remaining domestic refining capacity, which Ang emphasized plays a critical role in national fuel security amid ongoing volatility.

Volume Growth Driven by Trading

Consolidated sales volume across Petron's operations grew six percent to 67.9 million barrels in the first half, driven primarily by trading activity at the company's Singapore subsidiary. That growth offset a six percent decline in combined volume from Philippine and Malaysian operations, which totaled 52.9 million barrels.

In the Philippines, retail fuel sales rose 15 percent, but lower refinery output tempered overall gains. The Bataan facility underwent scheduled maintenance in the first quarter, while the company's Port Dickson refinery in Malaysia suspended production temporarily after a typhoon damaged its product jetty.

Biofuel Capacity Coming Online

Petron's coco-methyl ester plant, located within the Bataan refinery complex, is nearing completion. The facility will have an annual capacity of 180,000 tons and is expected to provide a more stable domestic supply of CME, a biodiesel component. The move aligns with the Philippines' biofuel blending mandates and reduces reliance on imported feedstock.

The company has not disclosed a firm commissioning date, but the plant is expected to begin operations later this year.

Regional Context

Petron's results highlight the exposure Southeast Asian refiners face to crude price shocks originating in the Middle East. While integrated oil majors in the region benefit from upstream production to cushion downstream margins, pure refiners like Petron bear the full brunt of input cost spikes.

The company's ability to maintain volume growth through its Singapore trading arm underscores the importance of regional logistics networks for Philippine energy firms. With no other domestic refining capacity, any extended disruption at Bataan would force the country to rely entirely on imported finished products, raising supply security concerns.

Dubai crude's volatility in the first half reflects the broader fragility of Asian oil markets when geopolitical risk premiums spike. Analysts expect margins to recover in the second half if crude prices stabilize, but freight costs remain elevated due to ongoing tensions in key shipping lanes.