UPDATE 1-Valero cuts gasoline output due to poor margins

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NEW YORK, March 11 (Reuters) - Valero Energy Corp. (VLO.N: Quote, Profile, Research, Stock Buzz), the largest refiner in the United States, has slightly reduced gasoline production from its refineries as soaring crude prices weaken profit margins, the company's CEO said on Tuesday.

The move comes even as prices for gasoline at the pumps soar through record highs. [ID:nN11560905]

Bill Klesse, Valero's chairman and chief executive officer, told reporters at the National Petrochemical and Refiners Association meeting that recent negative profit margins in the Upper Midwest forced Valero to slightly curtail rates at some fluid catalytic cracking units.

"I don't feel the obligation that we have to run at a loss and our shareholders would not expect us to run at a loss," Klesse said. He added he expected profit margins to improve heading into summer, when road travel typically peaks.

Although Klesse did not specify which refineries are running at reduced rates, he noted that the Chicago gasoline crack spread -- an indication of profit margins -- was negative for much of February.

U.S. refining profitability has been running well-below the last year's levels as an economic slowdown dampens fuel consumption and oil prices vault to record heights.

Crude oil hit a new peak near $110 per barrel on Tuesday amid an increase in speculative investing in commodities and concerns that world energy consumption will outpace new supply. [O/R]

Valero has had to obtain additional lines of credit as crude oil prices catapult to new records.