As U.S. oil production rises - setting records in average daily output nearly every month this year - the companies that convert crude to diesel and gasoline are increasing their ability to consume more crude and generate higher profits.

Using more efficient equipment and running bigger plants at peak speeds, the combined capacity of nation's 135 refineries was 18.6 million barrels per day (MMbbl/d) at the start of the year, up 16% over the 15.7 MMbbl/d in 1985, when there were 223 refineries, according to Energy Information Administration data.

Demand for new products coming from these expansions "will lead to higher refinery utilization, higher distillate prices and higher refinery margins generally," Arvinder Saluja, a senior analyst at debt ratings firm Moody's Investors Service, wrote in a report on Nov.1.

U.S. refinery utilization, or how much of the capacity is being used, hit a record 98% in early August, the EIA said. Utilization differs from capacity due to weather or maintenance disruptions, market demand and other factors.

This year, high production and ample supplies of shale and heavy Canadian oil have made U.S. refiners very profitable. Refining income this year through September at Phillips 66 was $1.94 billion, up 87% from the year earlier. Valero Energy's refining business posted an operating profit of $3.64 billion, up 21%.

Just as shale producers are exporting more, U.S. refiners which convert crude into low-sulfur fuels should be able to drive exports of marine fuel and profits higher next year. Earning from such sales can remain strong through "at least 2022," Moody's Saluja said.

Between 2012 and 2017, exports of finished U.S. refined products climbed by 772,000 bbl/d to 2.79 MMbbl/d, accounting for a national increase of refined products exports of 735,000 bbl/d to 3.34 MMbbl/d.

Consolidation is also lifting refiners' outlooks. Last month, second-largest refiner Marathon Petroleum Corp acquired fifth-largest Andeavor in part to gain Andeavor's ability to process shale and because of its retail gasoline network in Mexico.

Six of the 10 largest U.S. refineries are owned by oil producers, including Motiva, owned by Saudi Aramco, Exxon Mobil Corp and Chevron Corp .

"There is an enormous opportunity," said Ken Medlock, senior director of energy studies at Rice University’s Baker Institute for Public Policy. "The more functionally effective you are the more likely you are of turning a profit."

Onshore