France’s oil processing industry is operating at a fraction of normal capacity as worker strikes enter their fourth week.
Four of the country’s six refineries are barely functioning after Exxon Mobil Corp. began taking the larger of its two French facilities out of service over the weekend because it can’t get crude into the site. The country’s industrial action is having a knock-on effect on the global oil market, weakening prices for North Sea and West African grades.
The outflows have cut French diesel supplies by 200,000 barrels a day, Energy Aspects said in a report late last week. About 80 percent of the country’s crude processing capacity could be offline, data compiled by Bloomberg show.
“The strike action coincides with the maintenance of refining in North West Europe and unviable arbitrages on key routes,” Energy Aspects said. The departures have accelerated the rate at which diesel is being removed from storage, he added.
France depends on diesel imports to meet the supply at the pumps. Tankers bound for French ports have been diverted in recent days, with key import terminals limping along.
The diesel market showed signs of strengthening in early March, evident in spreads on ICE diesel futures, the region’s benchmark contract. The premium for the contract closest to expiration rose to $36.50 on March 22, more than double the level at the beginning of the month, before weakening late last week.
The latest round of strikes is increasingly reminiscent of last fall’s walkouts when refineries shut down and pumps ran dry. The impact on diesel may have been less severe this time because the region has built up inventories over the past year and is now entering the summer, when demand usually falls.
Rising economic headwinds could also affect Europe’s long-term demand, according to Energy Aspects. Fitch Solutions also sees the strikes having a soft impact on the fuel market this time around.
“Recession risks remain elevated,” said Emma Richards, associate director of oil and gas at Fitch Solutions. “Even before the current industrial action, we expected oil demand in both France and the EU region as a whole to decline year-on-year in 2023, which relieves some of the pressure.”
Total said on Monday that around 32% of its refinery operators had joined the strike, a reduction in participation since mid-month.
More information on the impact of the strike:
- France’s oil refining capacity is about 1.15 million barrels per day, according to data compiled by Bloomberg.
- About 900,000 barrels per day of crude processing capacity have been taken out of service or already stopped, according to data compiled by Bloomberg. This does not include reduced runs at plants that are still operating or chemical operations
- The two largest refineries, Total Normandy/Gonfreville and Exxon Gravenchon/Port Jerome, are located in Le Havre.
- Exxon began decommissioning Gravenchon in the northwest over the weekend
- The Normandy plant was shut down last week. The crude unit was taken offline on March 18, according to Wood Mackenzie
- Total’s Donges refinery on the west coast has been offline after a fault occurred before the latest round of strikes began.
- PetroIneos halted the crude oil section at Lavera on March 23, WoodMac reported
- Exxon Fos and Total Feyzin have cut runs
–With help from Jack Wittels.
Photo Credit – iStock.com/Yevhenii Dubinko
