Impact of French Refinery Strike - June 2016

A strike against proposed labour reforms disrupted France’s refining sector starting in the latter part of May. Some 40% of petrol stations in the Paris region were reporting shortages, fuel depots were being blockaded by oil workers, and the country’s refinery activity was significantly disrupted, with four refineries completely shut down and a fifth forced to cut throughputs by around 25%, for a combined impact of more than 0.8 mb/d in refinery capacity during the affected period representing more than half of the country’s total capacity.

In response, the French government released its strategic fuel stocks for the first time in six years. By 25 May, the country’s Transport Secretary said the government had used three days’ worth of reserves to supply the petrol stations that had been affected and stated that the government had sufficient strategic reserves to last 115 days. Some of the shortages were attributed to panic buying, as fuel consumption was roughly three times normal levels.

The disruptions contributed to a sharp fall in refinery utilization rates in France in May, which dropped to 62% for the first time since December 2013, after reaching a high so far this year of 85% the month before. Despite this disruption, existing high inventories of light and middle distillates in the region, along with the government’s release of strategic product stocks, were sufficient to prevent a spike in refining margins. According to the latest Euroilstock data, middle distillate inventories in the EU-16 fell less than 1% in May m-o-m, while gasoline stocks ended higher, keeping both around 10% above the same month a year ago.

The strike appeared be winding down by the second week of June, with Total reporting that it was restarting its Donges, Gonfreville, Feyzin, and Grandpuits refineries, and returning La Mède to full operations. However, some striking workers were blocking the full restart of operations at Donges, Gonfreville, and Feyzin.

The situation in the country’s oil ports may take longer to normalize as strikes continue to disrupt the country’s oil terminals. All discharges have been halted at the southern oil terminal of Fos-Lavera as well as at the northern terminal of Le Havre since 23 May and union workers recently voted to extend the shutdown until 14 June.