July 6, 2016 / 3:46 PM / 3 years ago

UPDATE 2-Philadelphia refinery cuts output as gasoline margins sink -source

(Adds restoration of a portion of Delta cuts and PES no comment)

By Jarrett Renshaw

NEW YORK, July 6 (Reuters) - U.S. East Coast refiners have cut production in recent days amid mounting concerns that a glut of supply will hammer profits even as motorists are expected to hit U.S. roads in record numbers this summer.

Philadelphia Energy Solutions was the latest East Coast refiner to clip production, reducing output by 10 percent Tuesday night at the 135,000 barrel-per-day Point Breeze section of the Philadelphia refinery complex, a source told Reuters on Wednesday.

A Philadelphia Energy Solutions spokeswoman declined to comment on Wednesday.

That news follows Delta Air Lines Inc’s decision to cut production by 16 percent at its 185,000 bpd refinery in Trainer, Pennsylvania, a source told Reuters on Tuesday, citing economic and operational reasons.

The steps are unusual because refiners often run at high rates during the summer to meet gasoline demand. It also marks the second round of run cuts this year.

About 40,000 bpd has been cut on East Coast, just a small portion of the region’s capacity, but the measures reflect, in part, deepening concerns about refiners’ profits.

Gasoline margins 1RBc1-CLc1 have plummeted more than 30 percent in the past eight trading sessions to February lows. That spread was down nearly 6 percent Wednesday.

“The fundamental weakness in gasoline markets is being exemplified by the RBOB crack spread, which is closing in on levels which would encourage refiners to dial back on runs,” said Matt Smith, analyst at New York-based oil cargo tracker Clipperdata.

Delta has since restored roughly 10,000 bpd of the cuts related to operations, a source said Wednesday, but the plant is still running about 11 percent short of capacity, the source said. Delta did not respond to requests for comment by email.

Phillips 66 has cut production in the 135,000 bpd gasoline-making unit at its Bayway refinery in Linden, New Jersey, by roughly 6,000 bpd, a source told Reuters on Wednesday, but the source said the reduction is not believed to be related to poor margins.

Phillips 66 declined to comment.

The U.S. East Coast is brimming with petroleum products, with inventories of gasoline at 72.5 million barrels as of last week, substantially above the five-year average.

The 135,000 bpd Point Breeze section of the Philadelphia refinery runs lighter, sweet crudes, like that from the Bakken shale of North Dakota and from the North Sea. (Reporting By Jarrett Renshaw and Devika Krishna Kumar; Editing by Chizu Nomiyama and Bill Trott)

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