French Strikes Offer Atlantic Refiners Lifeline
Refiners' profits in Europe and the United States are getting yet another lifeline from protracted strikes in France that have cut into the world's excess of diesel, jet fuel and gasoline.
A strike in France entering its third week shut four of Total's five refineries, knocking out most of the country's fuels production and forcing distributors to truck in fuel from neighbouring countries and tap stored volumes.
The disruption has roiled global markets, pushed prices for diesel and gasoline higher and boosted rivals' refining margins just as they had come under huge pressure from a daunting supply overhang.
French fuels production is down by more than half, with diesel output down by around 320,000 barrels per day (bpd) and gasoline by some 170,000 bpd due to the industrial action, according to consultancy Energy Aspects.
"This volume is enough to materially affect balances," said Robert Campbell, refined products analyst at consultancy Energy Aspects.
"France is running through a lot of inventory and though there is plenty of stock at hand, this is changing the picture and is fundamentally bullish."
The government also released at least 1.5 million barrels of products from its strategic storage, traders said.
The outages have had a more significant impact on gasoline prices, particularly in the U.S. East Coast, which absorbs most of France's excess production.
Gasoline appears on the front foot once again as U.S. gasoline demand over the past four weeks rose by 4 percent from a year ago to 9.66 million barrels per day.
Two Months of Support
The strikes, the worst since 2010, are set to lead to material losses for Total. But for other refiners in the region and overseas, the timing was perfect.
Oliver Jakob, managing director of Swiss-based consultancy PetroMatrix, estimates the French outages will support the Atlantic basin refining market over the next two months.
"It makes a better margin for refineries - and a more stable margin ... France will have to import at a high level for the next two months."
Global inventories of diesel and gasoline have risen to multi-year highs in recent months as refiners around the world pumped at full throttle ahead of the peak summer demand season. The large product builds, particularly for diesel, put refining profits under heavy pressure.
Global gasoline stocks declined last week by 1.3 percent to 273 million barrels, BNP Paribas data shows. At this level the stocks are nevertheless still up 11.4 percent from last year.
Diesel inventories registered a smaller 0.3 percent last week, holding 12.9 percent above last year's levels at 200 million barrels, according to the Paris-based bank.
Total said on Thursday it plans to restart its 220,000 bpd Donges refinery after workers there voted to end the strike, and said 62 percent of workers at the 101,000 bpd Granpuits refinery also voted to end strike action. Restarts could ease the crunch, but not erase it.
"France will have to rebuild its stocks," Jakob said.
(Reporting by Ron Bousso and Libby George, editing by David Evans)
