California woes hit refining shares hard

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

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

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

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

tumbled more than 4 percent in afternoon trading on the New York Stock Exchange. All three companies operate plants in California.

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

Companies with exposure to California will continue to suffer "headline risks" until the situation improves, Roger Read, analyst at Wells Fargo, said in a note to clients on Wednesday.

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

(Reporting By Anna Driver; editing by John Wallace)

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