US refiners are increasing their intake of Californian crudes, availability of which has risen as a result of refinery closures and a state plan to grow oil output.
Two Californian refineries have shut in the past year — US independent Phillips 66's 139,000 b/d Los Angeles complex and domestic counterpart Valero's 145,000 b/d plant in Benicia — reducing demand for local feedstock. These closures and recent hikes in production of some local grades "left the market pretty well supplied", says Randy Hawkins, vice-president of crude and feedstocks supply and trading at Valero, which still operates an 85,000 b/d refinery at Wilmington.
PBF Energy is upping runs of onshore Californian crudes by 25,000-30,000 b/d at its 160,000 b/d Torrance refinery, chief executive Matthew Lucey says, noting that extra production coming on line has been helpful for differentials. Marathon Petroleum doubled runs of Californian crude at its 365,000 b/d Los Angeles plant in the second quarter, chief commercial officer Rick Hessling says.
Californian crude prices have fallen further since December, as the idling of the San Pablo Bay pipeline to the San Francisco Bay area means local crude can only be sold to Los Angeles refiners, Hawkins says. Valero expects record runs of Californian crude at Wilmington in the coming months. The state's largest producer, California Resources, plans to take over the San Pablo Bay line as part of its pending purchase of Crimson Midstream.
The state has this year approved about 380 onshore oil drilling permits in Kern county, in a bid to stabilise fuel supply and prevent more refinery closures. But while Democrat governor Gavin Newsom has taken steps to up onshore output, the state strongly opposes the restart of a pipeline system off California's coast.
