Without adequate storage tank space in the Los Angeles market, Alon is unlikely to compete in the local racks or fuel distribution market. This move to give up storage tanks further reinforces market expectations that Alon’s California refineries would remain shut for an extend time period. Macquarie Capital expects Alon’s California system, which includes Bakersfield, Paramount and Long Beach facilities at a total throughput capacity of 94,000 b/d, to remain shut possibly until June.

The lack of interest into taking over Alon’s storage tanks also highlighted the continuous absence of arbitrage opportunities, tough gasoline trading environment and very weak demand. “No one wants those tanks because everyone wants to give their own tanks too,” a trader said.

Alon was offering 200,000 bbl of products storage space at Carson. With no takers, Alon may have to eat that cost or negotiate a buyout with Kinder Morgan. Alon’s storage lease at Carson is expected to expire at the end of this year. Besides Carson, Alon has some limited space at its Paramount refinery and communities racks.

Along with other West Coast refiners, Alon was hurt by a sharp plunge in gasoline prices and refining margins. In addition, Alon had to deal with costly trucking expenses, which ate into the company’s margins. Alon had to deliver vacuum gasoil from its Paramount refinery to its Bakersfield plant for processing. Alon then trucks gasoline and diesel back to Paramount.

Both Paramount and Bakersfield refineries were shut around late November 2011. OPIS reported Alon shut its rack products terminal in Bakersfield, Calif., amid an ongoing turnaround at its 15,000-b/d hydrocracker in its nearby refinery. The shutdowns failed to rattle the West Coast products markets so far as margins remain relatively poor.

West Coast traders expect more refinery shutdowns in order to rebalance the demand/supply equilibrium. A company spokesman declined to comment on the company’s day-to-day operations or shutdowns.