California woes hit refining shares hard

Oct 10 (Reuters) - Shares of refining companies withexposure to the volatile California fuel market fell sharply onWednesday as an immediate supply crisis eased, but extendedrefinery outages threatened to keep pressure on gasoline prices.

Retail gasoline prices in the state hit a record high ofnearly $5 a gallon this week, a price surge that stirred talk ofmarket manipulation and political backlash.

A series of refinery mishaps pinched supplies, includingdamage from a fire that shut a unit at Chevron's Richmond,California, refinery.

Shares of Valero Energy Corp fell more than 6percent, Tesoro Corp declined 7 percent and Chevron Corp

tumbled more than 4 percent in afternoon trading on theNew York Stock Exchange. All three companies operate plants inCalifornia.

Gasoline prices have started to ease as more supplies cometo market, but the average price of a gallon of regular gasolinein California is still $4.666, according to AAA Fuel Gauge.

Companies with exposure to California will continue tosuffer "headline risks" until the situation improves, RogerRead, analyst at Wells Fargo, said in a note to clients onWednesday.

West Coast profit margins have eased from record levels,Read wrote. Chevron on Tuesday noted a steep decline in its WestCoast marketing margins.

(Reporting By Anna Driver; editing by John Wallace)

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