US crude loses space in Valero refineries: UpdateOREANDA-NEWS. January 29, 2016. US crudes in domestic refineries are losing out to heavier feedstocks and imports, independent refiner Valero said today, but they should regain competitiveness later this year.

Valero cut its throughputs of continental US crudes by 400,000 b/d from the previous quarter as it increased runs of medium sour crudes and light, sweet imports, senior vice president of international operations Gary Simmons said today in the company's quarterly earnings call. Valero averaged 1.2mn b/d in light, sweet throughputs in the fourth quarter. The heavy crude diet remained the same.

Light Louisiana Sweet, a key domestic sweet crude marker for the US Gulf coast, traded at a premium to import benchmark Brent and encouraged imports of foreign crudes during the quarter.

Rising US inventories indicated that LLS was overpriced and would come down to compete with the waterborne imports, he said.

"I think we'll go through that volatility over the next six months, where we swing in and out of domestic light sweet into our refining system," Simmons said.

The movement welcomes light, sweet crude imports to a region that had almost completely shut them out just a year ago. The US Gulf coast imported 1.3mn b/d of light, sweet crude in January 2007, before the boom in onshore domestic crude production. Imports of crude higher than 30°API averaged just 47,484 b/d last year and 3,677 b/d the year before, according to the Energy Information Administration. Import data for 2016 is not yet available.

Shifting away from light crude will not curb the refiner's production of gasoline or change the conditions that helped create a glut of naphtha.West African sweet barrel yields are similar to US Eagle Ford and Bakken crude, while highly complex refining units wring comparable volumes of gasoline out of medium sour barrels, the company said.

Shift could create export opportunity

Valero's US Gulf coast dock capacity, developed with the rise of Eagle Ford production, could also see export business. The facilities were used to send up to 90,000 b/d of the south Texas crude to its 265,000 b/d St Romuald refinery in Quebec. But North Atlantic imports are once again economic at the facility, along with new deliveries of Bakken that began in December off of Enbridge's Line 9.

Valero has talked with companies interested in joining with it to export crude, now that US oil export restrictions have been lifted, vice president of logistics Richard Lashway said.

"We do see quite a bit of opportunity out there, given not just the decline in crude prices but the export opportunity," Lashway said.

A solid export market for distillates helped offset unseasonably low prices for the fuel during the fourth quarter, Valero said. The refiner averaged 157,000 b/d of gasoline exports, 264,000 b/d of distillate exports and 43,000 b/d of kerosene exports during the period, a combined record for the company.

Chief executive Joe Gorder shrugged off large increases in US gasoline inventories this month as a potential sign of flagging demand for the fuel. Strong vehicle sales and high miles-traveled data for the US last year support continued demand for the fuel in 2016, he said.

"It seems like every January, we find ourselves in a situation where we're looking at the year and everyone is saying, 'Oh, gee, is this over and is demand totally eroded'?" Gorder said. "Fundamentally, it looks like things should bode well for us going forward."