Marathon to Shut Third | Gansu Storage Tank Group

(Bloomberg) -- Diesel futures surged to a seven-month high in New York after Marathon Petroleum Corp. said it was shutting the third largest US oil refinery following a blaze at a storage tank.

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The fire at the Garyville refinery in south Louisiana was contained but ongoing late Friday afternoon, according to Marathon spokespeople. It’s the third blaze to strike the plant in less than a year. Parish officials have ordered residents within a two-mile radius to evacuate.

Diesel rose 5% while gasoline futures jumped about 4%. The outage threatens to deplete already below-average distillates stockpiles at a time when US demand for the fuel is set to rise going into the harvest and heating seasons.

Garyville, located on the Mississippi River between New Orleans and Baton Rouge, produces about 265,000 barrels a day of gasoline, or about 3% total US consumption. It also makes about 230,000 barrels per day of diesel, according to Andy Lipow, president of Lipow Oil Associates in Houston. The refinery has a crude processing capacity of 596,000 barrels a day.

The Louisiana Department of Environmental Quality “is conducting monitoring in the community adjacent to the site and all readings are nondetect,” according to spokesperson Gregory Langley.

The Environmental Protection Agency said it has deployed a federal coordinator to the site to oversee the response and provide technical support, including emergency response air monitoring in downwind communities. A firefighter is being evaluated for heat stress and two storage tanks have been damaged, according to Marathon spokesperson.

--With assistance from Jennifer A. Dlouhy, Chunzi Xu and Joe Aboussleman.

(Recasts with prices)