Marathon to 'Indefinitely Idle' Martinez Refinery, Convert to Terminal

July 31, 2020
OPIS was the first to report on this developing story on June 17, 2020. 

Marathon will "indefinitely idle" its 161,000-b/d Martinez refinery in the San Francisco Bay Area, converting it into a terminal facility, the company said in a statement posted to their website Friday evening. Marathon's 26,000-b/d Gallup refinery in New Mexico will be idled indefinitely as well.

Both refineries were temporarily idled earlier this year in response to a sharp decrease in fuel demand tied to business closures and travel restrictions due to the coronavirus-disease 2019 (COVID-19) pandemic.

"On July 31, we informed employees at our Martinez and Gallup refineries that we will indefinitely idle these facilities with no plans to restart normal operations. As part of these changes, Martinez will be converted to a terminal facility," the announcement said.

Marathon is also "evaluating the strategic repositioning of the Martinez refinery to a renewable diesel facility, which aligns with California's Low Carbon Fuel Standards (LCFS) objectives and MPC's greenhouse gas reduction targets."

Marathon previously set a goal to slash its GHG emissions per barrel of oil equivalent processed across the company to 30% below 2014 levels by 2030.

The decision to keep Martinez and Gallup idled will mean a phased reduction of most jobs at the refineries, which will begin in October, the company said. The Martinez refinery currently employs approximately 740 people, while Gallup employs approximately 220, according to Marathon's website.

The company does not anticipate supply disruptions in these regions and Marathon "will continue to utilize our integrated system to meet customer commitments," the statement said.

The Martinez refinery produced California-boutique grade CARB gasoline and diesel fuel as well as conventional gasoline and distillates, petroleum coke, propane, heavy fuel oil and refinery-grade propylene, which were distributed via truck, rail, pipeline and ship.

In terms of barrel output, Marathon's Martinez facility was the fourth-largest petroleum refinery in California, and the second-largest in the Bay area, according to the California Energy Commission.

Marathon acquired the Martinez refinery in a Merger with Andeavor in 2018.
Andeavor itself was previously Tesoro; which rebranded as Andeavor after a merger with Western Refining 2017.

Marathon's Gallup refinery produced gasoline, distillates, heavy fuel oil and propane, which were distributed via transport truck and rail.

In the spot market, San Francisco CARBOB weakened in trade earlier Friday, before the announcement. August-delivery barrels traded at 15cts/gal and 16cts/gal above the NYMEX September RBOB contract, off from trades confirmed as high as plus 18cts/gal on Thursday. Futures weakness amplified losses for S.F.
CARBOB outright prices, which dropped about 4cts/gal to an OPIS assessment of $1.3261/gal on Friday.

The Martinez refinery's idling trims the already relatively short list of refineries able to produce fuels that meet the California's stringent CARB specifications, which tend to be pricier to make.

In addition, the California fuel market is known for its vulnerability to price volatility in response to supply disruptions, owing both to its unique fuel requirements and the geographic isolation of its fuel infrastructure, which hampers resupply in times of tight inventories. Los Angeles and San Francisco frequently rely on each other when the market is short product, and supply disruptions in either location are often seen impacting fuel prices in both.

--Reporting by Kylee West,
--Editing by Lisa Street,

Copyright, Oil Price Information Service

Rare European Mogas Cargo Targets U.S. West Coast; Calif. Spot Prices Slide

June 1, 2020

In a rare voyage, a gasoline cargo originating in Europe and rerouted from U.S. East Coast was scheduled to arrive Tuesday in Los Angeles, creating a bearish pricing atmosphere in the California spot markets, West Coast trading sources told OPIS.

The vessel Crystal Bay originated in Antwerp and was destined for the New York Harbor before being rerouted to the U.S. West Coast, according to IHS Markit's Market Intelligence Network ship tracking data.

IHS Markit is the parent company of OPIS.

Although OPIS has not officially confirmed the product on board, numerous West Coast traders have said Crystal Bay is likely carrying an "F2" 9-lb. RVP RBOB cargo, although not all trading sources agree on the specifications.

"If it originated in Antwerp there's a high chance it is RBOB, whether it would meet CARB (California Air Resources Board) specifications is another ballgame," a West Coast trader said.

California is known to have the most stringent fuel regulations in the country, and very few refineries outside of the state can easily produce CARB-compliant fuels.

A second trading source said it's possible the cargo could be "cleaned up" and shipped as AZRBOB, which is commanding a 19cts/gal premium to the NYMEX in the West Coast spot market.

New York Harbor gasoline brokers did not show offers for the Crystal Bay cargo in the Atlantic Coast market, East Coast gasoline traders said.

Bringing cargos into the West Coast can extremely tricky, due to price fluctuations in the spot market during the weeks it takes vessels to travel from Europe or Asia.

"That tells me it was never offered on (Atlantic Coast)," a second cargo trading source said. "Likely was always intended to go to West Coast. They got nervous when Los Angeles (spot market) collapsed, now that's it's stormed back, they went back to Plan A."

Separately, multiple traders have said the vessel Energy Puma, also originating in Antwerp, is on the way to the West Coast. The vessel was indicating Panama as its destination on Monday, according to the MINT database.

Several West Coast traders attributed weaker CARBOB futures premiums in Los Angeles and San Francisco to the impending cargoes.

Los Angeles CARBOB futures premiums slipped 4cts/gal to NYMEX July RBOB contract plus 10.5cts/gal this afternoon, with weaker offers amid limited buying. Bids were heard at the NYMEX plus 8cts/gal and offers were most recently heard at plus 11cts/gal. Implied outright prices were about 5cts/gal lower, at around $1.17/gal at 4 p.m. EDT.

San Francisco CARBOB cash differentials weakened 5cts/gal to the July NYMEX plus 10.50cts/gal, with offers heard at plus 11cts/gal and no bids seen.

Implied prices fell to around $1.20/gal.

"Looks like a refiner is punishing an importer," a West Coast trade source said.

It was unknown if a refiner was offering fuel in the California gasoline spot markets this afternoon.

Futures premiums for L.A. and S.F. CARBOB last week rose to a high last seen since mid-March and early February, respectively, but showed definitive weakness with cash trading Monday.

"Not a very deep pool for cargos to dive into in a normal market. With COVID, things are that much harder," a fourth West Coast trading source said, referencing the coronavirus disease 2019 (COVID-19) impact on fuel demand.


--Reporting by Kylee West, and Bayan Raji,;

--Editing by Lisa Street,

Copyright, Oil Price Information Service

As California Gas, Diesel Hike Higher, Traders 'Cautiously Optimistic'

May 7, 2020

California gas and diesel spot market cash differentials firmed with brisk trade on Thursday with market participants citing several factors they consider to be the cause for cautious optimism.

Weekly fuel demand for the West (including the Rockies) remains significantly lower year-on-year, according to OPIS DemandPro data, however modest week-on-week increases have been logged the last two weeks. OPIS DemandPro data indicate a 7.9% increase in demand for the week of April 18 and a 5.9% demand increase the week of April 25.

Gasoline inventories for the West Coast (PADD5) region posted one of the largest national draws of 1.6 million bbl for the week ended May 1, according to U.S. Energy Information Administration.

"You had a draw of 1.6 million this week and a similar volume the week prior," a West Coast trader said. "Run rates are still cut. People are probably anticipating a surge once (California's stay-at-home order) is lifted."

Additionally, West Coast refiners have managed to significantly reduce run rates. Refiner utilization rates for the week ended May 1 were under 60%, the lowest of all five regions nationally aside from the Northeast, according to the U.S. Energy Information Administration.

Demand may be higher and refiner run rates are at historic lows for the West Coast, however both CARB reformulated gasoline inventories and CARB diesel inventories remain well-above year-ago marks, according to the California Energy Commission's Weekly Fuels Watch Report.

CARB RFG inventories decreased 10.8% for the week ended May 1 from the week prior, but remain 14.1% above year-ago levels, according to the CEC.

CARB diesel inventories also posted a week-on-week draw, yet diesel inventories are nearly 8% higher than this time last year.

"I would describe the outlook as cautiously optimistic" said one veteran West Coast trader.

May-delivered Los Angeles CARBOB differentials strengthened 2.25cts/gal after transacting at NYMEX June RBOB futures plus 4cts/gal. Implied prices rallied 7.70cts/gal with a combination of Merc buying and firmer basis levels pushing implied prices within spitting distance of $1/gal.

"(It's a) combo of demand increasing, still down (year-on-year) but increasing (week-on-week) and run cuts," a second West Coast trader said, adding "longer transit times too on the pipe."

West Coast traders had previously told OPIS that Kinder Morgan, operator of key regional product transport pipelines, reduced flow rates to accommodate decreased demand caused by stay-at-home measures geared towards combating the coronavirus disease 2019 (COVID-19) pandemic.

"We continue to make the adjustments necessary to ensure continued pipeline operations. We are working closely with our customers on this matter," Kinder Morgan previously told OPIS.

Diesel values also strengthened this week, with a third West Coast trader saying diesel demand has picked up.

Los Angeles CARB diesel discounts narrowed to NYMEX June ULSD futures minus 5cts/gal after trading at that level on Thursday afternoon. That's half of what the discounts were this time last week, according to OPIS data.

San Francisco CARB diesel traded at minus 3cts/gal on Thursday, compared to an assessed mean of minus 14.50cts/gal a week ago.

The OPIS Bottom Line Report continues to show double-digit discounts at the wholesale level to the posted OPIS low in some California cities. Sacramento CARB diesel discounts of 32cts/gal at the wholesale level were reported, good for a wholesale price of about $0.83/gal. San Francisco wholesale CARB diesel discounts of nearly 30cts/gal were reported.

In addition to working through plentiful refined products inventories, more than a dozen crude oil laden tankers remain outside the Ports of Los Angeles and Long Beach, OPIS previously reported. Data from IHS Markit's  Market Intelligence Network (MINT) ship tracking database indicate at least a dozen remain in the area waiting to unload.

IHS Markit is the parent company of OPIS.

--Reporting by Bayan Raji,;

--editing by Kylee West,

Copyright, Oil Price Information Service

Marathon Petroleum to Temporarily Idle Martinez Refinery

April 17, 2020

Marathon Petroleum said it will temporarily idle its 166,000-b/d Martinez, Calif., refinery later this month due to weak demand caused by the coronavirus disease 2019 pandemic (COVID-19).

"COVID-19 and the public health response to it have negatively impacted the global economy and demand for our products," according to a statement from the company on Friday. "Accordingly, MPC will temporarily idle our Martinez, California, refinery as of April 27. We plan to utilize our integrated network of assets to continue meeting customer commitments and do not anticipate supply disruptions in the region."

Marathon said in the statement it would maintain regular employee staffing levels during the idle period, with employees assigned to tasks that are necessary to support its idle status and eventual return to normal operations.

"At this time, the duration of the idle period is unknown; however, it is our intent to return to normal operations once demand levels support doing so," according to the statement.

Refiner utilization rates for the West Coast (PADD5) region were at all-time lows of 65.1% for the week ended April 10, according to the U.S. Energy Information Administration.


--Reporting by Bayan Raji,;

--Editing by Kylee West,

Copyright, Oil Price Information Service

California Gas at the Pump Drops Below $3/gal

April 8, 2020

As regional gasoline inventories continue to grow amid a drop-off in demand, the statewide average for gas at the pump in California slipped below $3/gal this week for the first time in two and a half years.

For the few drivers who are out on the roads in the state with a stay-at-home order in place, prices at the pump average $2.935/gal, according to AAA. The last time Californians saw the average this low was following Hurricane Harvey in August 2017.

Still, Californians are paying about a $1/gal more than the national average.

Market sources have reported demand off by as much as 60% for some West Coast retailers. Year-on-year, OPIS DemandPro data indicate demand was off 50% for the week ended March 28 for the West, which includes the Rockies.

At the wholesale level, the OPIS Bottom Line Report shows discounts of 25cts/gal to the OPIS Low in the Los Angeles area, with deals confirmed at 65cts/gal. In San Francisco, discounts of 3cts/gal to the OPIS Low were confirmed, good for a price for 60.75cts/gal.

Major price declines at the spot market level have ignited the lower prices for consumers. Los Angeles CARBOB spot market prices are more than $1.50/gal below month-ago marks. San Francisco CARBOB prices have lost about $1.30/gal over the last five weeks.

West Coast refiners have reduced utilization rates in an effort to adjust for demand destruction caused by the coronavirus disease 2019 (COVID-19), but gasoline inventory levels continue to grow and currently sit at two-year highs for the West Coast (PADD5) region.

PADD5 refiner utilization rates were 69.2% for the week ended April 3, down from 76.8% the week prior, according to freshly released Energy Information Administration data.

The OPIS Refinery Maintenance Report (RMR) previously reported Chevron idled the larger of two crude units at its 290,500-b/d El Segundo, Calif., refinery.

PBF Energy's 158,000-b/d Martinez, Calif., refinery has temporarily idled its FCC, OPIS RMR reported. Similarly, the 147,000-b/d Phillips 66 refinery in Los Angeles and Valero's 87,000-b/d Wilmington refinery, also in Southern California, have also reportedly reduced rates.


--Reporting by Bayan Raji,; and Beth Heinsohn,;

--Editing by Kylee West,

Copyright, Oil Price Information Service