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Valero Memphis refinery halts production on pipeline upset

Valero Energy Corp’s 180,000 barrel per day (bpd) Memphis, Tennessee, refinery was knocked out of production by a Diamond Pipeline malfunction, said sources familiar with plant operations.

Severe weather interrupted operations on the Diamond Pipeline, and the crude supply from the pipeline fell below the needed amount to operate the refinery late on Thursday morning, the sources said.

Most of the units at the Memphis refinery are on circulation, kept at operating temperature and moving a specialized feedstock in a loop through the individual units which would enable to units to restart quickly, the sources said.

A Valero spokeswoman did not reply to a request for comment about operations at the Memphis refinery on Thursday.

The Valero refinery is the primary supplier of jet fuel to the Memphis International Airport, where FedEx Corp has its hub for global operations.

The outage, along with data from Genscape showing a 1.5 million-barrel weekly increase in crude stocks sent prices lower at the Cushing, Oklahoma, hub, traders said.

U.S. Midwest gasoline cash differentials rose on Thursday. Chicago CBOB gasoline gained 2.00 cents a gallon to trade at 1.50 cents per gallon above the gasoline futures benchmark on NYMEX. Group Three gasoline rose three-quarters of a penny to trade at 5.25 cents per gallon below futures.

The 20-inch Diamond Pipeline can transport up to 200,000 bpd in crude oil 440 miles (708 km) from the Cushing oil hub to the Memphis refinery. The pipeline is a joint venture between Valero and Plains All-American.

On Monday, Valero shut the 65,000-bpd gasoline-producing fluidic catalytic cracking unit for an overhaul scheduled to last at least two months.

Also, Valero had cut back production on the 110,000 bpd East Crude Distillation Unit by at least 25 percent because the shut FCCU could not take the feedstock the crude unit provides.

The two Valero Memphis CDUs do the primary refining of crude oil, providing feedstock for all other units at the refinery, as well as producing unfinished motor fuels.

Reporting by Erwin Seba; Editing by Marguerita Choy and James Dalgleish

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