Weak fuel demand seen expanding US refinery work

NEW YORK (Reuters) – U.S. refiners are likely to take more processing units down for longer periods during spring maintenance as prolonged economic weakness squelches demand for gasoline and diesel fuel.

Waves of job losses and the housing market meltdown have hit driving and spending habits of Americans, and that is expected to keep a tight lid on once-soaring demand for oil products, prompting refiners to take the extra repair time.

“There is too much capacity to make gasoline in this environment,” said Bill Klesse, chief executive of Valero Energy Corp (VLO.N), the nation’s largest refiner. “If the industry doesn’t balance supply with demand, we will have negative margins, as we had in December.”

That marks a big turnaround from the past several years, when analysts blamed a shortage of refinery capacity partly for record gasoline prices.

The purpose of spring refinery maintenance is to prepare the complex plants for the needs of the peak summer driving season. But now, with gasoline profit margins barely in the black, the trend of economic run cuts, which began late last year, is expected to continue as fuel demand for shipping and driving keeps dropping.

Reuters