Chevron blames offshore well start-up for Mars crude quality issues, DOE releases barrels from SPR.

Chevron's offshore well start-up caused zinc contamination in Mars crude, leading to tight crude oil supply in the Gulf Coast refining hub and the US government releasing barrels from its emergency stockpile. Exxon Mobil requested barrels from the Strategic Petroleum Reserve after zinc contamination was identified in Mars crude. The DOE authorized the exchange of oil to maintain stable regional supply of transportation fuels. Chevron is working to resolve the issue and does not expect an impact to current production guidance.

The start-up of an offshore well by Chevron has led to zinc contamination in Mars crude, causing a tight crude oil supply in the Gulf Coast refining hub. This event has prompted the U.S. government to release barrels from its emergency stockpile to maintain stable regional supply of transportation fuels. Exxon Mobil, facing disruptions in its Baton Rouge refinery, requested barrels from the Strategic Petroleum Reserve (SPR), which the Department of Energy (DOE) authorized.

The Mars crude stream, which supplies about 575,000 barrels per day of oil to the Gulf Coast, has seen a 15-cent premium over U.S. crude prices at the Cushing, Oklahoma, hub [1]. The contamination issue has led to operational challenges for refineries, which are typically configured to run specific crude grades for optimal yields of different fuels. Exxon Mobil has indicated it will not buy the Mars crude oil grade until the zinc contamination issue is resolved [1].

The DOE has agreed to provide up to 1 million barrels of crude oil from the SPR to Exxon Mobil to support the restoration of refinery operations [2]. Chevron is actively working to resolve the contamination issue and does not expect it to impact current production guidance [3]. The company has pinpointed a likely source for the alterations in the Mars crude oil composition, linking it to the initiation of a new well [3].

The tight supply of crude oil and the zinc contamination issue underscore the importance of the U.S. Gulf Coast as a key refining hub. The DOE's exchange of oil with Exxon Mobil is part of broader efforts to maintain stable regional supply of transportation fuels across Louisiana and the broader Gulf Coast [2].

References:
[1] https://uk.finance.yahoo.com/news/chevron-says-offshore-well-start-161325893.html
[2] https://www.marketwatch.com/story/department-of-energy-agrees-to-crude-exchange-with-exxon-mobil-554ab801
[3] https://www.gurufocus.com/news/2972933/chevron-cvx-addresses-mars-crude-composition-changes-cvx-stock-news