Jan 30^th, 2012: (AP)  NEW YORK — A tough fourth quarter for the refining industry will likely be followed by a turnaround this year for some companies as competitors take plants offline, a Citi analyst said Monday.

Refineries, which turn crude oil into gasoline, diesel and other petroleum products, have wrestled with weak profit margins as American drivers buy less gasoline. A 3 percent drop in gasoline demand last year helped push retail prices about 7 percent lower in the final three months of the year. Meanwhile benchmark oil prices rose about 5 percent.

In response, companies such as ConocoPhillips, Sunoco and Hess Corp. have shut down some of their refineries. Those closures will benefit companies like Valero Energy Corp. that haven't. Valero is America's biggest independent refining company.

Others, such as HollyFrontier Corp. and Marathon Petroleum Corp., should also benefit through their access to cheaper crudes produced in the Midwest, Citi analyst Faisel Khan said.

Khan increased 2012 earnings estimates for rivals Valero, HollyFrontier and Marathon to $4.28, $6.67 and $7.14 per share, respectively.

Khan cut his 2012 earnings targets for Sunoco, which shut down its Marcus Hook refinery earlier than expected in December, to $2.08 from $2.48 per share. He also cut earnings estimates for Tesoro Corp. to $4.37 from $4.91 per share after the company announced that it would post a loss in the fourth quarter due to weak profit margins.

In afternoon trading, shares of Valero rose 25 cents to $24.38, HollyFrontier rose 18 cents to $29.92 and Marathon Petroleum added a penny at $37.54. Sunoco shares rose 29 cents to $38.66 and Tesoro fell 3 cents to $25.45.

By CBS News