UPDATE 4-Valero expects lower refinery utilization as margins tank

Tue Jul 26, 2016 1:19pm EDT
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* Q2 earnings/shr $1.07 vs estimate of $1.00

* Refining margin falls to $8.93/barrel from $13.71

* Sees 2016 biofuel blending costs at $750 mln-$850 mln (Adds details)

July 26 (Reuters) - Valero Energy Corp expects lower refinery utilization over the rest of the year as companies step up efforts to counter slumping refining margins caused by record supplies of gasoline and diesel products.

Shares of Valero, which also reported a better-than-expected quarterly profit, were up 3 percent at $51.88 in morning trade on Tuesday.

Analysts have said the market will be unable to soak up the gasoline that refiners stockpiled ahead of a summer driving season unless demand surges.

The glut in refined products pushed down Valero's refining throughput margin to $8.93 per barrel in the second quarter ended June 30 from $13.71 per barrel, a year earlier.

"Refinery utilization has been such that supply has been able to keep up and even outpace demand, so ultimately we are going to need a rebalancing and see lower refinery utilization," said Gary Simmons, senior vice president of supply, international operations and systems optimization at Valero.   Continued...