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UPDATE 3-U.S. oil refiner Marathon Petroleum cuts 12% of staff because of pandemic

(Updates with company confirmation)

HOUSTON, Sept 30 (Reuters) - Marathon Petroleum Corp , the top U.S. oil refiner, is cutting 12% of its workforce amid continued declines in fuel consumption due to the COVID-19 pandemic, it said on Wednesday.

Refiners and oil producers have been dismissing staff, slashing spending and reducing production to cope with weak prices and a global glut of fuel. U.S. gasoline futures are down 26% from a year ago and oil is trading down a third from where it began the year.

Marathon will incur an up to $175 million charge to third quarter earnings for the 2,050 job cuts, it reported to the U.S. Securities and Exchange Commission. About 20% of the charge will be recouped from its publicly traded pipeline unit, the company said.

The Findlay, Ohio, firm disclosed the workforce cuts after Reuters on Tuesday reported employees across the company had been notified of impending layoffs.

The cuts includes staff at its Martinez, California, and Gallup, New Mexico refineries, which in July were designated to close. The shutdowns and job cuts will lower overall costs beginning next year, Marathon said in a statement.

Employees of its retail gasoline business are not included in the 12% reduction. Marathon in August agreed to sell its Speedway unit to Japan’s Seven & i Holdings Co Ltd, a deal expected to close next year.

Red ink and job cuts are expected across the oil industry as results start rolling out next month. U.S. refiners typically gear up for winter heating oil demand after summer driving season ends. This year, heating oil and gasoline consumption are both depressed.

“The pandemic has resulted in near-record lows on diesel margins, the go-to product for refineries as we enter into the winter heating season,” said Andrew Lipow, president of consultancy Lipow Oil Associates.

“The glut in refining capacity has forced these downstream companies into layoffs,” he said.

Marathon this week notified employees of 100 job cuts at its Robinson, Illinois, refinery, 60 in its Los Angeles Refinery, 57 in the Catlettsburg, Kentucky, refinery, 45 at the refinery in Garyville, Louisiana, 20 at the Canton, Ohio, plant and 15 in St. Paul Park, Minnesota, refinery, people familiar with the matter said.

Workers were also notified of 108 job cuts at Marathon’s largest plant, the 585,000 barrel-per-day (bpd) Galveston Bay Refinery, in Texas City, Texas. The total there may reach more than 200, the people said.

This month, Royal Dutch Shell and LyondellBasell Industries both announced 10% workforce cuts. Top U.S. oil companies Chevron Corp and Exxon Mobil Corp are also in the process of restructuring their businesses to halt losses.

Shell on Tuesday disclosed its refineries ran at between 64% and 68% of their capacity in the quarter ending today, a very low rate.

Marathon is expected to report a $623-million third-quarter loss on Nov. 2, according to IBES data from Refinitiv. It lost $9.2 billion in the first half of the year, mostly on impairment charges.

Its shares traded at $29.34 on Wednesday, down a fraction. The stock is off 52% since the year began. (Reporting by Erwin Seba Editing by Chizu Nomiyama, Aurora Ellis and Richard Pullin)

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