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Schork Oil Outlook: How French Strikes Tap US

Unexpected added draw on US petroleum products...

According to numerous newswire reports, Petroleos Mexicanos (Pemex), the state-owned oil company of Mexico, reported an explosion at its 235 Mbbl/d Cadereyta refinery, that country’s third (of six) largest refinery.

Unfortunately, similar to the situation in Iran, Mexico is one of the world’s largest exporters of crude oil, but it has to import a significant amount of refined products… much of which is supplied by the U.S.

Through the first half of this year Mexico imported 588 Mbbl/d of refined oil products, most of which was gasolines, ?60%, according to Pemex’s website. Over the same timeframe, the DOE reports that total U.S. exports of petroleum products to Mexico were 405 Mbbl/d. Thus, any extended disruption to operations at the Cadereyta refinery sets the table for an unforeseen added draw to U.S. petroleum products on the eve of the fall maintenance season.

Today’s issue of The Schork Report further notes that the impact is exacerbated by the fact that it is strike season in France.

As such, refineries for the French oil giant Total operated at, as Dow Jones reported, “…the minimum and at the level compatible with the security of the installations…” after workers took a 24 hour holiday as part of nationwide general strike; a strike that was predicated on the objection to French sensibilities to the gall (or is that Gaul?) of the Sarkozy government’s proposal to raise the retirement age to 62, i.e. two years below the average of OECD countries.

C’est la vie, this market never gets easy.

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Stephen Schork is the Editor of The Schork Report and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.