Strikes at French oil refineries have given temporary relief to volatile crude markets in Europe but created delayed demand for future months when refined product supply is set to be tight.
Over 60% of France's refining capacity – or 740,000 barrels per day (bpd) – has been offline since mid-September because of strike action over pay or unplanned maintenance.
The outages have significantly reduced demand for grades of crude in Europe that typically feed France's refineries, and weighed on prices.
WTI Midland and CPC crude grades usually make up 30% - or 300,000 barrels per day (bpd) – of French crude imports, but no cargoes have been delivered this month in a rare occurrence, according to commodity analyst Kpler.
"The weakening in demand for these crudes has seen differentials for both grades come increasingly under pressure and shed around $2/bbl since the beginning of the month," Kpler analyst Johannes Rauball said.
France also imported around 100,000 bpd of crude produced in the North Sea before the start of strike action, according to Energy Aspects. It relied on the Ekofisk North Sea crude grade, produced at a field in Norway where French oil major TotalEnergies has equity, traders said.
Ekofisk differentials to dated Brent dropped on Oct. 13 to their lowest since early January as TotalEnergies looked to sell the grade, according to Refinitiv Eikon and industry sources.
An Ekofisk cargo is on track for end-October arrival at TotalEnergies' 230,000 bpd Donges refinery, Kpler said, where strike action ended on Wednesday. Walkouts also ended last week at Exxon Mobil's 140,000 barrel per day (bpd) Fos-Sur-Mer and 240,000 bpd Port Jerome-Gravenchon oil refineries.
However, Exxon Mobil expects a full restart at its refineries to take 2-3 weeks. And analysts expect regional crude prices to remain subdued for this time following stock builds.
French crude inventories have risen by 13% compared with a month ago and are at 14 month-highs at over 48 million bbls, according to consultancy OilX.
Strike action has delayed a recovery in North Sea crude prices typically seen around this time of year ahead of refineries returning from Autumn maintenance, said Richard Price, oil markets analyst at Energy Aspects.
"When 1 million barrels per day of European CDU capacity comes back online in November, and we have these French refinery strikes coming to an end, it's likely we'll see a lot of upside in the North Sea and dated Brent," Price said.
European refineries are set to return from a heavy turnaround season in a critically-short diesel market, as traders scramble to secure fuel supplies ahead of a European Union ban on Russian refined products.
(Reporting by Rowena Edwards; Editing by Susan Fenton)