I can relate to this, was in a similar situation in the past. I don't think it's even enough to just fail the local leves (as in run out of materials) you have to physically go up to the dude, talk to him, listen to how dissapointed he is, and finally clear that quest off your list.
That is not true. I have failed local quests several times (as in, used up the last of my materials without making the requisite number of items) and I can state unequivocally that a failed local quest disappears from your journal as soon as you finish that last synth. You never have to talk to the client about the failed leve (and in fact, you can't, since the leve is gone). I have heard from a few people on this board who apparently are *not* getting their failed leves removed; I would guess this is some sort of bug.
We need an abandon quest button. Please.
We're getting one. As part of their big "we're fixing things" announcement, one of things SE promised us was a button to abandon local leves.