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Fire Shuts Crude Unit at Chevron's Top U.S. Refinery

A fire struck one of two crude units at Chevron's 325,000 barrels per day Pascagoula, Mississippi, refinery late Thursday, injuring no one but helping send gasoline prices nearly 2% higher.

A "major portion" of the plant, Chevron's biggest in the United States, continues to operate, company officials told Reuters. The blaze was noticed at 2:15 p.m. Central Time and contained a couple of hours later, but still was burning at 8:30 p.m. Central Time.

They were unable to say what caused the fire, how much damage it had caused or when full operations would be restored.

"There were no injuries," said Steve Renfroe, the refinery public affairs official. Renfroe said that the fire was at the No. 2 crude unit at Pascagoula, and that the No. 1 crude unit at the refinery was operating. A crude unit is at the core of the refining process, breaking down crude for processing into refined fuels.

"The smoke was visible four miles away," said a local fire department official, who said the fire was being fought by private refinery firefighters.

Pascagoula is one of the 10 largest refineries in the United States and fears that the fire would reduce fuel supplies lifted futures prices, with September gasoline up 1.75% to $2.0130 per gallon in after hours trading.

Those gains and a 60-cent rise in the benchmark crude contract helped markets recover their poise following much deeper losses on Thursday, when the
energy complex suffered another wave of selling linked to global credit market turmoil.

Gasoline, diesel fuel, jet fuel, and heating oil produced at Pascagoula flow into the Colonial Pipeline, the biggest U.S. pipeline, which runs from Texas up to the New York area.

Another Chevron spokesman said crews for the Thursday night shift reported as usual and that Friday morning's crews were being told to report for work.

The plant has suffered extended outages twice in the past decade, most recently in 2005, after Hurricanes Rita and Katrina forced it to shut down for six weeks. It was also closed for three months in 1998 when heavy rains and a storm surge from Hurricane Georges flooded the plant.

Unlike 1998, when world oil markets were awash in crude and U.S. oil cost a sixth of its current price, traders are on high alert for any supply disruption that could erode gasoline stocks, which have only recently recovered to normal levels, or curtail heating fuel supplies ahead of the winter.

Oil traders are also anxious about the possibility that seasonal hurricanes could deal another blow to Gulf Coast refineries, which account for nearly half total U.S. capacity.

The season's first big storm, Hurricane Dean, is expected to strengthen into a Category 4 storm over the next few days, although recent forecasts show it crossing the Yucatan peninsula and entering the southern Gulf, possibly sparing coastal plants.

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