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Exxon Slashes Louisiana Refinery Output Amid Crumbling Demand

U.S. oil supermajor ExxonMobil has reduced the run rates at its second-largest refinery in the United States, Baton Rouge in Louisiana, after slumping fuel demand has filled storage tanks, sources with knowledge of the operations at the 502,500-bpd refinery told Reuters on Monday.

Exxon reduced the production processing rate to some 440,000 bpd on Saturday, and the number of contract workers was reduced by 1,800 on Friday, Reuters sources said. The Baton Rouge facility typically employs around 2,000 contract workers.

The Baton Rouge refinery is Exxon’s second-largest refinery and the second-biggest refinery in the state of Louisiana.  

Demand for fuel in the United States, and across the world, is taking a major hit as people are asked or ordered to stay at home as countries grapple with the spread of the coronavirus pandemic. Oil demand in the United States is set to tumble over the following weeks, as cities are under lockdown, non-essential businesses and services are closed, and people are asked to work from home wherever possible.  

Considering that the United States is the largest consumer of crude oil in the world, consuming 19.96 million bpd--or 20 percent of the world’s total, demand in the U.S. alone is set for a steep decline while states and the federal government fight with the growing cases of Covid-19 infections. In the U.S., the transportation sector is the backbone of oil demand, accounting for 9.329 million bpd of all petroleum products consumed in the U.S. in 2018, according to the Energy Information Administration (EIA).

Europe consumes around 7 million bpd of the world’s crude oil demand, or 7 percent of the typical 100-million-bpd demand, and although this demand is smaller than the one in the U.S., European oil demand is plummeting as all major economies, including the worst-coronavirus-hit Italy, Spain, France, and now Germany, are under lockdown, with travel strongly discouraged.

Refining operations in Europe and elsewhere in the world are being curtailed as gasoline and jet fuel demand is falling off a cliff due to the enormous demand destruction in the spreading coronavirus pandemic.

In Europe, oil majors are shutting down refinery units as major economies are under lockdown and flights are severely restricted, Reuters reported on Friday, quoting sources and industry data provider Genscape.  

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By Tsvetana Paraskova for Oilprice.com

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