California fundamentals still strong: Tesoro

OREANDA-NEWS. August 05, 2016. Thinning refined products imports should improve west coast margins and leave room for high refinery run rates, US independent refiner Tesoro said today.

Outright California gasoline prices fell to unseasonably low levels as steady operations from new California refiner PBF Energy met a wave of gasoline imports in July.

Imports will fade now that the state no longer needs the supply, chief executive Greg Goff said. Fundamentals "are as attractive as they've ever been" and the west coast market should have room for the current refiners and a small amount of imports, he said. Demand remained strong through the summer, he said.

"We don't see anything that would indicate to us that there's a structural change in the market that would have an impact on the margin environment going forward," Goff said.

Tesoro expects to run its California refineries at up to 540,000 b/d during the third quarter, or roughly full capacity. The company was ready to begin construction once a permit was awarded for integration work at its Los Angeles complex between its Wilmington refinery and the Carson refinery Tesoro purchased from BP in 2014. That permit was in the final stages of an environmental review process at the South Coast Air Quality Management District and should be done by the end of the year, the company said.

Review also continued for the company's long-delayed 360,000 b/d railed crude offloading facility in Vancouver, Washington.

Falling Bakken production and increased pipeline capacity out of North Dakota to larger markets would likely increase competition for barrels, but Tesoro expected its gathering, storage and rail infrastructure in North Dakota would keep movements to the west coast competitive.

"The competition may be greater, but we're not concerned that we're going to be short supply," Goff said.

The company also continues to look at chances to supply products to Mexico and Latin America. US west coast refiners have roughly 140,000 b/d of gasoline and diesel export opportunity, Goff said.

Most of Tesoro's export activity comes from its 120,000 b/d refinery in Anacortes, Washington, Goff said.

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