French Refineries Are Barely Running as Strikes Enter Week Four

France’s oil-processing industry is running at a fraction of normal capacity as worker strikes enter their fourth week.

(Bloomberg) — France’s oil-processing industry is running at a fraction of normal capacity as worker strikes enter their fourth week.

Four of the nation’s six refineries are barely operating after Exxon Mobil Corp. started taking the larger of its two French facilities out of service at the weekend because it can’t get crude into the site. The country’s labor action is causing ripple effects across the global oil market, weakening prices of grades from the North Sea and West Africa.

Walkouts have reduced French diesel supply by 200,000 barrels a day, Energy Aspects said in a report at the end of last week. About 80% of the nation’s crude-processing capacity could be offline, data compiled by Bloomberg show. 

“Strike action is coinciding with refining maintenance in northwest Europe and unworkable arbitrages at key routes,” Energy Aspects said. Walkouts have accelerated the pace at which diesel is being taken out of storage, it added.

France relies on diesel imports to meet supply at the pumps. Tankers bound for French ports have diverted in recent days, with key import terminals hobbled.

The diesel market showed signs of strengthening in early March, evident in spreads in ICE gasoil futures, the region’s benchmark contract. The premium on the contract closest to expiry rose to as much as $36.50 on March 22 — more than double the level at the start of the month — before weakening at the end of last week. 

The latest round of strike action is increasingly reminiscent of the walkouts last autumn when refineries halted and pumps ran dry. The impact on diesel has possibly been less severe this time around because the region has built up inventories in the past year and is now entering summer, when demand typically falls.  

Mounting economic headwinds might also weigh on Europe’s longer-term demand, according to Energy Aspects. Fitch Solutions also sees strikes having a muted impact on the fuels market this time around. 

“Recession risks are still elevated,” said Emma Richards, associate director for oil and gas at Fitch Solutions. “Even in advance of the current industrial action, we expected oil demand in both France and the wider EU region to decline year-on-year in 2023, which takes some of the pressure off.”

Total said Monday that about 32% of operators at its refineries joined strike action, a cut in participation from the middle of the month.

More on strike impact:

  • France’s oil-refining capacity is about 1.15 million barrels a day, according to data compiled by Bloomberg
  • About 900,000 barrels a day of crude-processing capacity has been taken out of service or has already halted, according to data compiled by Bloomberg. That doesn’t include reduced runs at plants still operating or chemical operations
  • The two biggest refineries — Total Normandy/Gonfreville and Exxon Gravenchon/Port Jerome — are in Le Havre
  • Exxon started taking Gravenchon in the northwest out of service at the weekend
  • The Normandy plant halted last week. The crude unit was taken offline March 18, according to Wood Mackenzie
  • Total’s Donges refinery on the west coast has been offline following a fault that occurred before the latest round of strikes started
  • PetroIneos halted the crude section at Lavera on March 23, WoodMac reported
  • Exxon Fos and Total Feyzin have cut runs

–With assistance from Jack Wittels.

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