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Valero Energy Corp.(VLO) said it expects more refining capacity to come offline because of weakening fuel demand, even after a number of refinery closures in the U.S. and Europe in the past year.
High unemployment and higher vehicle fuel efficiency have tamped down on fuel sales on both sides of the Atlantic. High oil prices and decreasing fuel demand caused a number of U.S. refineries in the northeast to shut down, while Valero shut its refinery in Aruba and Hovensa LLC, a joint venture between Hess Corp. (HES) and Petroleos de Venezuela S.A.(PDVSA), shut its refinery in the Virgin Islands.
"We believe there's still too much refining capacity in the U.S. and western Europe," Valero Chief Executive Bill Klesse said during a conference call with investors. "Some things die hard."
Valero said U.S. gasoline sales in April were "about even" from the month before. Gasoline sales on a same-store basis were down 0.7%, a company executive said during a conference call with investors.
Instead, sales growth was coming from exports.
Valero exported 170,000 barrels a day of diesel exports in the first quarter, the bulk of it to Europe. First-quarter gasoline exports were 80,000 barrels a day, most of which went to Mexico, the company said.
Valero also said it could double the amount of domestically produced light, sweet crude oil its refineries run, to 400,000 barrels, a day with minor costs to its refineries. Valero owns a handful of refineries with access to the Eagle Ford shale, an increasingly productive source of light, sweet crude in south Texas. Crude oil from Eagle Ford is currently selling at $6 a barrel below that for Gulf Coast benchmark crude Light Louisiana Sweet.
Valero said its newly acquired refineries in Meruax, La., and Pembroke, Wales, were showing signs of turning a profit after being unprofitable during the first quarter.
-By Ben Lefebvre, Dow Jones Newswires; 713-547-9201; email@example.com