Valero. What will MRC do?
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Valero slows down refining capacity
Leading refiner losing money on gasoline business
An earlier version of this story incorrectly referred to $5-$10 a barrel negative gasoline crack spread losses as Valero's. The figures represent industry-wide estimates.
NEW YORK (MarketWatch) -- Valero Energy Corp. said Wednesday it's slashing production to cope with a pressured gasoline refining business, as market prices pushed down by depressed crude demand continue to plumb multi-year lows.
As retail U.S. gasoline prices remain below $1.70 a gallon, Valero (VLO:
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VLO 22.35, +1.52, +7.3%) spokesman Bill Day said overall crack spreads in the industry are down $5 to $10 a barrel on the auto fuel.
valero energy corp new com
Last: 22.35+1.52+7.30%
4:00pm 12/17/2008
Delayed quote data
4:00pm 12/17/2008
Delayed quote data
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Valero's shares rose 7.3% to close at $22.35.
The San Antonio, Texas, company, ranked as the largest stand-alone refiner in North America, will run its fluid catalytic cracking units at 70% to 75% of capacity in December, or at least 20% below normal levels, Day said.
While industry-wide crack spreads are running at a loss, Valero manages to outperform its peers by buying lower-priced grades of crude oil for processing at its refineries, Day said.
Meanwhile, retail gasoline prices edged up by a penny to $1.67 a gallon on Wednesday, according to the AA Daily Fuel Gauge Report.
Analysts expect Valero to post lower earnings in 2009 on the heels of cooler oil prices and expectations for an economic slowdown in the coming 12 months.
Wall Street researchers expect 2009 earnings of $3.52 a share for Valero, down from $4.28 a share expected for 2008, according to FactSet Research.
In the halcyon days of 2007, Valero earned $7.79 a share.
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