(Reuters) -Refiner Phillips 66 reported a smaller-than-expected loss on Friday as strength in its renewables segment offset a sharp decline in refining margins.

The renewables fuels segment reported a quarterly profit of $28 million, compared to a loss of $11 million from a year earlier.

The U.S. refining industry saw exceptional profits for two years following supply shortages from Russia's invasion of Ukraine, while a post-pandemic demand surge drove up margins.

However, new refining capacity came online at the end of 2023, causing margins to return to normal levels and putting pressure on refiner profits.

Quarterly U.S. refinery margins, measured by the 3-2-1 crack spread, have been down on an average from a year earlier, touching as low as $15.04 in mid-December.

The company's realized margin was down at $6.08 per barrel in the quarter, compared with $13.88 per barrel from a year earlier.

On an adjusted basis, the company reported a loss of 15 cents per share in the quarter, compared with the analysts average estimate of 23 cents loss per share, according to data compiled by LSEG.