ExxonMobil Curbs Baton Rouge Output Amid Weak Market Demand
Zacks Investment Research | Mar 23, 2020 11:40PM ET
Exxon Mobil Corporation (NYSE:XOM) has reportedly reduced production from the 502,500 barrels per day Baton Rouge refinery, located in Louisiana, following declining demand and reduced staffing at the site. The refinery, which was shut following a fire on Feb 12, restored production capacity on Mar 9. Notably, production from the Baton Rouge unit declined to 440,000 barrels per day on Saturday.
ExxonMobil’s inventories have increased and storage tanks are filling quickly as the market is witnessing lower demand due to social distancing, an ongoing method of preventing the spread of coronavirus. Demand for motor fuel is expected to decline until normalcy returns. It is to be noted that other refineries in the country are also following suit.
Moreover, the company is said to have opted for minimum staffing for the same reasons. The number of contract workers in the facility was reduced by 1,800 last Friday, per Reuters. Notably, the number of contract workers at the site is usually 2,000 and is increased when needed.
Importantly, the company's downstream operations recorded $3,687 million year-over-year lower profit in 2019 due to maintenance activities and contraction in the industry's fuel margins. Its refinery throughput averaged 4.1 MMBbls/d in the last reported quarter, lower than the year-earlier level of 4.3 MMBbls/d. With the present market conditions, the situation is not expected to improve anytime soon. However, President Trump, who doesn’t like shutdowns, expects the federal guidance on social distancing to ease in a few weeks. This will likely lead to inventory drawdown as the demand for fuels will rise.
Another company, Phillips 66 (NYSE:PSX) has reduced rates by 15-20% at its Bayway refinery in New Jersey, per S&P Global (NYSE:SPGI) Platts.
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