Chevron blames offshore well for zinc contamination in Mars crude, leading to US SPR release.
US oil major Chevron has identified zinc contamination in Mars crude caused by the start-up of an offshore well, leading to supply disruptions in the Gulf Coast refining region. The U.S. Department of Energy (DOE) responded by releasing up to 1 million barrels from the Strategic Petroleum Reserve (SPR) to ExxonMobil’s Baton Rouge refinery.
Mars crude oil, a medium sour variety produced off the coast of Louisiana, is highly valued by Gulf Coast refineries for its quality and proximity, with approximately 575,000 barrels per day moving through the Mars system to the coast, according to Energy Aspects. The situation emerged due to the start-up of a new offshore well, which introduced zinc contamination into the crude oil stream. Zinc, not a natural component of crude oil, poses risks to refining units and catalysts, potentially damaging equipment and affecting fuel yields.
Major refiners like Exxon Mobil have halted purchases of Mars crude until the issue is fixed. The U.S. Department of Energy has intervened by releasing oil from the Strategic Petroleum Reserve to mitigate the impact, highlighting the severity of the supply tightness. The contamination has caused significant supply disruptions, with inventories dropping to their lowest seasonal levels in seven years, exacerbated by wildfires in Canada, U.S. sanctions on Venezuelan crude, and Mexico’s declining oil production.
The price of Mars crude has swung sharply, reflecting market anxiety. On Friday, it traded at a 15-cent premium to U.S. benchmark crude, up from a 10-cent discount earlier in the week. Refineries are scrambling for alternative supplies, though medium sour crude is scarce.
Chevron confirmed it is working to resolve the contamination without impacting its current production guidance. The company’s swift identification and response are critical to restoring trust in Mars crude and minimizing long-term fallout. The incident underscores the vulnerabilities in global oil markets and the need for improved well management and supply-chain adjustments.
Maria Kutuzova