October 21, 2010 / 8:38 PM / in 7 years

US fuel exports to Europe surge on French strike

* US boosts fuel cargoes to Europe as France strikes

* US diesel exports rise 20 pct to over 600,000 bpd-source

* Chevron among cos chartering Europe-bound tankers

* French port and refinery stoppages boost import demand

By Joshua Schneyer and Jeffrey Kerr

NEW YORK, Oct 21 (Reuters) - U.S. exports of fuel to Europe have surged by up to 20 percent in recent weeks as refiners take advantage of an arbitrage window created by French port and refinery strikes, according to shipping sources.

One tanker operator said U.S. exports of diesel have jumped to 600,000 barrels per day, up from around 500,000 bpd a few weeks ago, supported by rising European demand as the strike at France’s main oil hub of Fos-Lavera nears its 25th day.

With the vast majority of diesel shipments headed across the Atlantic, U.S. exports to Europe may be at their highest levels in at least five years. (Graphic of U.S. distillate exports: r.reuters.com/ruf69p)

The strikes, protesting government-mandated pension reforms, have extended to France’s refinery network and are causing fuel shortages. [ID:nLDE69J0EF]

“Diesel exports are going great guns,” the tanker operator said, requesting anonymity.

While shipping fuel into France from tankers remains virtually impossible since ports are blocked, the rest of Europe is feeling the pinch of tighter supplies, he added.

French imports of oil products hit a record level this week, a French government spokesman said on Wednesday. He gave no details on volumes or which products were supplied. [ID:nWEA3246]

Chevron (CVX.N) is among the companies that have booked product tankers bound for Europe since late last week, shipping sources said. Chevron didn’t respond to a request for comment.

The oil major scheduled to load the Navig8 Stealth II refined product tanker, rated at 50,695 deadweight tonnes, on the U.S. Gulf Coast on Wednesday. Charter data shows it will sail to Britain or Continental Europe, although Chevron holds an option to divert the tanker along its journey.

Along with shipments to Europe, U.S. refiners have been sending mostly lower quality distillates from the Gulf Coast to fuel-hungry South America. Gasoline exports have also recently jumped to Mexico, ship brokers said.

Depending on the U.S. port of origin, tankers can reach Europe in as little as 11 days. The export opportunities are a boon for U.S. refiners whose margins have been battered by weak fuel demand, helping keep U.S. refined product stocks well above five-year average levels.

The Asia-Europe arbitrage is closed, after being open for the first two weeks of the strikes. However, traders said the economics of moving U.S. distillates to Europe remain favorable.

    Brokers have recorded at least five charter tankers of distillate bound for Europe from U.S. Gulf Coast and East Coast locations since Friday. Each ship can carry around 300,000 barrels. Several other charters may not yet be listed, they said.

    Larger exports helped to boost product tanker rates by 10 wordscale points, or 11.8 percent, to 95 WS last week, brokers said. Two charters were booked from the East Coast to Europe at 90 WS on Tuesday, down slightly from the earlier rates.

    Several shipments are for ultra-low sulfur diesel (ULSD), sources said. While the distillate does not meet European specifications for road use, it can be used for home heating.

    Other shipments, including the Chevron charter, are not specified by product, the sources said.

    U.S. traders said that the country’s refiners would be unlikely to send gasoline to Europe, which usually has a surplus of the fuel. U.S. refineries would also have trouble meeting European gasoline specs.

    Still, U.S. East Coast gasoline inventories may fall as the strikes cut European exports, which have already been falling in recent years.

    According to TOP Ships CEO Evangelos Pistiolis, shipments of gasoline from Europe to the U.S. Atlantic Coast are down “about 40 to 45 percent from the heyday of the pre-Lehman Brothers-failure levels” seen in 2008, and were not likely to regain those levels any time soon.

    U.S. products such as jet fuel, whose specs are standardized worldwide, may also be flowing to Europe, brokers said.

    U.S. exports to Europe may compete against Asian exports, fuel traders said. At least three tankers have been fixed this week to ship a total 215,000 tonnes of Asian gas oil to Europe despite a closed arbitrage window, traders told Reuters in Asia.

    Additional reporting by Ikuko Kurahone, Robert Campbell, Bruce Nichols, Jennifer Tan and Selam Gebrekidan; Editing by Lisa Shumaker

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