Oil products markets brace as French refineries strike

Any French refinery disruptions arising from strikes this week could be cushioned by ample stocks of road fuels, at least in the short-term, although there is some concern among market participants about the prospect of a repeat of widespread disruptions seen in 2022.

Workers at all six of France's refineries voted in favour of strike action in a pension rights dispute with the government, causing the blockage of oil product deliveries from all sites as of this morning. Other infrastructure have been affected, including petrochemical plants, ports and fuel depots.

With the strikes being held on a rolling basis, a prolonged dispute could coincide with refinery maintenance season and constrain products supply.

For now, the country's biggest refiner TotalEnergies said there was no lack of fuel at its retail stations. ExxonMobil told Argus that its Gravenchon petrochemical plant and its 133,000 b/d Fos refinery were running normal production operations, although loadings were blocked, and said it plans to maximise fuel supply to mitigate any effect on customers. Petroineos — the country's other refinery operator — was approached for comment by Argus.

Participants in the northwest European gasoline market said any effect on prices in the region could be muted in the short-term by ample supply. Multiple traders noted that stock levels had been built up recently, and the economics for long-haul voyages to the US are waning. Additional gasoline has been sold from the Amsterdam-Rotterdam-Antwerp (ARA) trading hub down the Rhine River into eastern France in recent weeks, possibly in preparation for the strikes, and a trader even said strikes could help clear local oversupply.

The effect on diesel has the potential to be greater, as France is traditionally Europe's major market and the continent is already in a precarious position with supply since the EU embargo on Russian imports came into force on 5 February. Russia had previously covered as much as 50pc of European import demand.

A rush of imports to fill stocks ahead of that deadline saw diesel inventories jump — particularly because of an influx of cargoes from east of Suez since the start of the year. Gasoil stocks in ARA reached a two-year high in late February, although this could change quickly in the event of supply shocks or a rebound in demand.

Some traders fear a drawn-out battle between unions and the government, harking back to the autumn of 2022 when weeks-long industrial action over wage disputes hamstrung the French refining sector and resulted in a release of strategic reserves as fuel stations ran dry.

Prolonged disruptions come as spring refinery maintenance in Europe will take capacity offline, with the peak-demand summer driving and tourism seasons approaching.

France's six refineries consist of TotalEnergies' 219,000 b/d Donges, 246,900 b/d Gonfreville and 109,300 b/d Feyzin, ExxonMobil's Fos and 236,000 b/d Port Jerome and Petroineos' 207,100 b/d Lavera.

By Robert Harvey, George Maher-Bonnett and Jonah Sweeney