SIGMA: Refinery Closures to Cut U.S. 2026 Oil Output by 3%


   
Maria Eugenia Garcia
DTN Managing Editor

   NASHVILLE, TN (DTN) -- Refinery closures are likely to reduce U.S. petroleum 
production capacity by 3% in 2026, with California seeing the major shutdowns, 
Megan Boutwell, president of Stillwaters Associates, said at the SIGMA 2025 
Annual Conference.

   The closures will come as U.S. refining capacity has struggled to fully 
recover from the pandemic, remaining relatively stable at 18.4 million bpd as 
of the start of this year, Boutwell said at the conference this week.

   Most of the shutdowns are in California, where strict environmental policies 
-- including the state's Low Carbon Fuel Standard and cap-and-trade program -- 
have accelerated refinery conversions and closures, according to Boutwell. 
Phillips 66's Los Angeles refinery will halt operations this year, while Valero 
plans to shutter its Benicia refinery by April 2026.

   Combined with earlier conversions of Phillips 66's Rodeo and Marathon's 
Martinez refineries to renewable fuel production, the state will lose nearly 
17.8 million bbl of annual refining capacity, equivalent to nearly 3% of total 
U.S. output, Boutwell said.

   To compensate for lost supply, the region will likely increase imports from 
Asian refiners in South Korea and India, while Washington state's Ferndale 
refinery has announced plans to produce California's special CARB gasoline 
blend.

   In order to offset the regional shortfall, refiners and pipeline operators 
have announced new open seasons. Kinder Morgan recently completed an open 
season for its East Line from El Paso to Tucson, adding 2,500 bpd of diesel 
capacity. Magellan Midstream Partners launched a Sunbelt Connector open season 
in September to move refined products from Houston to Phoenix.

   Additionally, the Western Gateway Pipeline -- a joint venture between Kinder 
Morgan and Phillips 66 -- would bring refined fuel into California for the 
first time via a new and reversed 1,300-mile system linking Texas to Phoenix 
and Colton, California.




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