Marathon to idle Martinez as virus cuts demand: Update

Sharply lower demand will idle Marathon Petroleum's northern California refining complex at the end of the month, the US largest facility so far to confirm halting operations as Covid-19 mitigation efforts smother gasoline and jet fuel consumption.

The independent refiner, which operates the largest US refining footprint by crude capacity, said it would start idling the 166,000 b/d Martinez refinery on 27 April. Marathon will keep staff and resume operations based on market demand, the company said. The company idled its much smaller 26,000 b/d refinery Gallup, New Mexico, for similar demand concerns earlier this week.

US gasoline and jet fuel demand have collapsed as local governments restrict travel to limit the spread of the coronavirus pandemic. Implied gasoline demand nationwide last week averaged just 54pc of year-ago volumes, at 5.1mn b/d. Refiners have generally continued to keep their operational decisions close to the vest, but have confirmed deferring maintenance and cutting rates on gasoline-producing units in particular to manage the plunge.

Chevron, Phillips 66, PBF Energy and Valero have all confirmed some level of reduction either in California or across their national refining systems. US refiners have reduced crude processing to roughly 80pc of the five-year average for early April, based on Energy Information Administration data.

But northern California led the nation in setting movement and gathering restrictions, so refiners supplying that market have endured the longest curtailed market. California refineries by last week had already reduced crude processing to less than 70pc of the five-year average, and just 64pc of state capacity, according to the California Energy Commission.

Gasoline stockpiles in northern California have continued to climb, according to state data. CARBOB and blendstock inventories crept to an unseasonably high 7.5mn bl, despite consistently lower gasoline production than southern California refineries, according to the state.

The governors of California, Oregon and Washington this week announced a state-level pact guiding the reopening of businesses that includes increased testing and tracking for the virus. The governors have not said when those conditions would be achieved, but California governor Gavin Newsom said yesterday that deaths and hospitalizations in the state would need to "decline substantially" to begin that process.

Discounts to Nymex RBOB futures for May San Francisco CARBOB narrowed today by 50pc from the previous day on news of the Martinez idling. May San Francisco CARBOB traded at June RBOB -10¢/USG this morning, pulling cash differentials higher by 10¢/USG from yesterday's confirmed deal.

Prompt April barrels traded at -20¢/USG yesterday for Bay area gasoline with May CARBOB changing hands at the same level.

This morning's trade moved the market from flat to a contango curve between prompt and second month timing, with two trading days remaining for April. May barrels will become prompt on 20 April.

By Jason Metko and Craig Ross and Elliott Blackburn