US fuel exports rise amid French strikes, prices may follow - trader

21 October 2010 20:13  [Source: ICIS news]

HOUSTON (ICIS)--US exports of refined products to Europe have increased following the ongoing strike action in France, a New York Harbour trader said on Thursday, easing a US supply glut and potentially pressuring prices higher.

"The arbitrage to Europe is open now for diesel,” the trader said. “We're seeing Europe attract barrels from the east coast as well as the Gulf.”

Major labour disputes and strikes in France have resulted in a shortage of European gasoil supplies and higher spot prices, sources said. Oil shipments have not been able to leave or enter the Fos-Lavera oil terminal in southern France since the strike began on 27 September.

In addition, the labour disputes have spread across unions and to refineries, all in protest to France raising its retirement age.

“Right now, the market is being incented to move barrels, but to say how much more [than normal] is being moved is hard to put a finger on,” the trader said. “I'd say that we'd expect any available surplus barrel to be finding its way onto a ship.”

Germany's average gasoline price has risen by 2 euro cents to €1.39/litre since the end of September, when the widespread French strikes began. This compared with an average increase of 9 euro cents in Rotterdam-traded gasoline.

A broker in the New York Harbour said that cargoes of reformulated gasoline blendstock for oxygenate blending (RBOB) recently left port headed for Europe because European inventories were running very low.

Europe uses more diesel than the US, so typically diesel has always been exported to Europe. The volume exported fluctuates based on relative values and shipping costs.

Traders had suspected that Europe would export gasoline to the New York Harbour late this month as refineries come out of maintenance. As such, the cargoes would have added to the supply glut and pressured prices lower.

Because of the strikes, however, Europe lacked fuel to spare for export.

"Fundamentally, the strikes should hold prices up in the New York Harbour,” said a trader. “But, there is plenty of gasoline moving up Colonial Pipeline from the Gulf coast and I believe Reliance can fill a big void (in Europe).”

Reliance operates a refinery in India that has a capacity of more than 500,000 bbl/day.

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By: Sheena Martin
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