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Premature Closure Of Houston Refinery Could Worsen The Fuel Crunch

U.S. refining capacity could take a hit from an earlier than planned closure of a major refinery in Houston, which could worsen the refining and fuel crunch in the country.

LyondellBasell—which announced in April that it would cease operation of its Houston Refinery by the end of 2023—could close the facility prematurely if a major equipment failure affects processing units, two sources with knowledge of the chemicals giant’s operations told Reuters on Tuesday.

LyondellBasell’s 268,000-bpd Houston refinery has the ability to transform very heavy high-sulfur crude oil into clean fuels, including reformulated gasoline and low-sulfur diesel. Other products include heating oil, jet fuel, olefins feedstocks, aromatics, lubricants, and petroleum coke.

The firm, however, said earlier this year that “we have determined that exiting the refining business by the end of next year is the best strategic and financial path forward for the Company.”

LyondellBasell did not immediately respond to a request for comment from Reuters.

If the Houston refinery closes much earlier than the end of 2023, it could exacerbate the already strained refining capacity in the United States.

Some 1 million bpd of refinery capacity in America has been shut permanently since the start of the pandemic, as refiners have opted to either close money-losing facilities or convert some of them into biofuel production sites.

In the United States, operable refinery capacity was at just over 18 million bpd in 2021, the lowest since 2015, per EIA data. 

U.S. refineries cannot catch up with demand, which has rebounded from the COVID lows and is still robust despite the record-high gasoline and diesel prices in America. Inventories of fuel are at multi-year lows as the Russian invasion of Ukraine upended oil trade flows and constrained supply. 

Motor gasoline inventories in the U.S. are now about 9% below the five-year average for this time of year, the EIA’s latest data from last Wednesday showed. Distillate fuel inventories, which include diesel, are about 24% below the five-year average for this time of year. 

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By Tsvetana Paraskova for Oilprice.com

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