NEW YORK, March 11 Valero Energy Corp. (VLO.N),
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.
Valero has had to obtain additional lines of credit as
crude oil prices catapult to new records.
"$110 oil is clearly stretching our working capital,"
Klesse said. "We are still buying the same amount of oil, but
with the price, we are exceeding our credit limit."
Klesse said the company has not experienced any
difficulties meeting its oil demand, but said the price of oil
has been driven artificially high by market speculation.
Klesse said he expects an increase in refining margins for
the spring and summer months of April, May, and June, as retail
gasoline demand increases.
"My expectation is that (gasoline) prices, because of crude
oil, are going to be higher this summer," Klesse said.
The U.S. government's Energy Information Administration
said pump prices are likely to exceed $4 a gallon in some
regions, with the average U.S. price to peak at $3.50 by this
spring, at the beginning of the traditional driving season.
(Reporting by Rebekah Kebede; Editing by Marguerita Choy)