February 1, 2010 / 2:03 PM / 9 years ago

UPDATE 3-Sunoco permanently shuts Eagle Point, NJ, refinery

(Adds Sunoco’s total refinery capacity in 4th paragraph)

NEW YORK, Feb 1 (Reuters) - Sunoco Inc (SUN.N) has permanently shut down its idled 145,000-barrel-per-day refinery in Eagle Point, New Jersey, as weak margins continue to batter the U.S. refining sector, the company said Monday.

Sunoco had idled the plant late last year due to weak demand for refined products.

“Given weak industry dynamics, we are confident we are taking the right actions to improve our overall competitiveness,” Chairman and Chief Executive Lynn L. Elsenhans said.

Before being shut, the Eagle Point refinery represented 18 percent of Sunoco’s 825,000 bpd crude oil processing capacity. The company now has a total of 675,000 bpd crude processing capacity.

The refinery shutdown comes as U.S. refining industry profits continue to suffer due to lower fuel demand.

For a factbox on other U.S. refinery shutdowns, click here: [ID:nN01181076]

Last week, Valero Energy Corp (VLO.N), the leading U.S. refiner, reported a quarterly loss and slashed its dividend due to pressure from poor refining margins.

Fourth-quarter profits at top U.S. oil companies Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N) also sank as their refining businesses suffered.

“We are not immune to the challenges facing other refiners,” Sunoco spokesman Thomas Golembeski said.

Sunoco will release its fourth-quarter earnings on Thursday. After its Monday announcement, the company’s stock price rose 4.4 percent by midday.

“(The shutdown) is not going to grow their business, but it will stop the bleeding,” said Fadel Gheit, an oil analyst with Oppenheimer & Co.

Although the shutdown of the Eagle Point refinery may help boost refining margins in the East Coast, a glut of fuel inventories will still weigh on margins, analysts said.

“It helps on the margin, but I think you might need more radical help than that to get margins moving again,” said Jason Gammel, an analyst with Macquarie Research.

The shutdown is not expected to have any additional material financial effect on the company, Sunoco said.

In October, Sunoco said the action would lead to a $250 million in overall annual savings, but result in $475 million to $550 million in largely non-cash financial charges over the next few quarters. (Reporting by Rebekah Kebede; Editing by Walter Bagley)

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