x Abu Dhabi, UAEMonday 24 July 2017

Pension reform protesters halt French oil supply chain

Shortages at petrol pumps loom as eight out of 12 French refineries begin strike action, worsening the conflict over the Fos-Lavera oil port that has dragged on for more than two weeks.

PARIS // French workers protesting against pension reform said they had halted supplies from most of the country's oil refineries and were also blocking some fuel depots as the risk grew of shortages at petrol pumps. 

Refinery workers downed tools on Tuesday as part of nationwide strikes over a government pension reform, adding to the strain on France's fuel supply due to a dispute at the Fos-Lavera oil port that has lasted more than two weeks.

Eight out of 12 French refineries are on strike as of today. Workers at some plants voted for a 48-hour stoppage, while others who backed a 24-hour strike were due to vote again on Wednesday on whether to extend their action. A CGT trade union official said oil major Total's Donges refinery voted to extend the action until Monday, Oct. 18. 

Eight refineries saw fuel supplies blocked on Wednesday, including all of Total's six refineries in France, the union said.

"By some estimates the strike could continue during the next two weeks and lead to product shortages," the International Energy Agency said in its monthly report on Wednesday. It said it expected more products to start flowing to France from abroad after a fleet of diesel cargoes was sent to Europe from the United States and Asia last week. 

The IEA also said European refinery utilisation was only at 82 percent right now, which meant supplies could be increased elsewhere within the region to deal with a disruption.

"The problem, rather, is a logistical one involving the movement of crude and products within France," the IEA said. However, shipbrokers told Reuters on Wednesday that at least three tankers shipping Northeast Asian gas oil to Europe were cancelled as the arbitrage was shut. ICE gasoil prices for November rose by 1 percent but stayed off their previous peaks this week, reversing their previous backwardation to contango in a sign market worries over products shortages might be easing.

European gasoline prices rose above $770 a tonne, hitting a five-and-a-half month highs. "The market feels like it will go a bit higher," a broker said. "But all depends on how long the strikes last. It still seems to be worsening rather than reducing." The IEA said France appeared to be using emergency crude stocks in the worst affected regions and replenishing them with commercial reserves held elsewhere in the country.

Unions said a small number of local fuel depots were also blocked due to the strike, raising the risk of shortages occurring at fuel pumps much more quickly if such actions were repeated at depots across the country. JBC consultancy said in a report it expected middle distillate prices to rise should the strike continue, which would in turn favour the use of volumes held off-shore. At Fos-Lavera, a longer-running strike over port and pension reforms entered its 17th day. Workers were due to meet later on Wednesday to discuss the outcome of talks the previous day between unions and management, the CGT said.

French oil lobby UFIP said on Tuesday that petrol stations could start to see shortages in just over a week if the Fos-Lavera strike continued, but assuming refinery disruption would not last. Production at four of Total's five working refineries would be halted progressively, a decision that was supported in a vote among strikers or made at the request of Total management, a CGT spokesman said on Wednesday.

* Reuters