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There’s a term in oil markets that always fascinated me, it’s the crack spread: the spread between a barrel of crude and a barrel of refined petroleum. But it would seem that this spread could now pose serious cracks into French society unless a rapid logistical plan is put in place in order to confront it.

Stock SAGESSEFollowing on from my last two posts, France is still in the midst of industrial action that has blocked all of its refineries from operations.

This is an issue on two fronts. One, these refineries are central to the production of refined petroleum in France and the market is currently locked on them for their supply logistics, and two, they take roughly a week or so to restart meaning that any resolution will still cause a one-week lag on resupply and refinery capacity.

I previously posted that France had roughly 90 days worth (on ordinary usage) of strategic reserves for petroleum. But, as previously noted, these stocks were designed to confront exogenous shocks to the system, not an endogenous industrial action. In other words, they only contain roughly 10% of refined petroleum for ready usage. This gives roughly 9 days of supply available. As these stocks were set to confront the industrial action last Friday, this leaves us roughly two more days before the refined strategic reserves are depleted…

Even if one augments these strategic reserve tally to 98.5 days, then there remains the problem that these reserves are a strategic national security asset: ie primarily designed for emergency subsistence, so the potential 18.5 days would need to be halved when considering what is available for civilian usage. This brings me back to 9 days, of which 7 have already been used.

Oh, and France is in the middle of a peak-demand period with national holidays having just begun and demand shocks due to expected depletion having already forced emergency excess supplies (without much effect, mind you, on the depletion rate at service stations).

As I mentioned before, France is not an island or a continental-ranging landmass, so prospects of European deliveries are an option, assuming that the government has properly gamed this out with an appropriate logistical plan. Again, trucker union have also joined in as was previously, unfortunately, forecast, so the resupply could still meet a number of hick-ups along the way…

Which brings me back to the crack spread, which I had discussed with some people off this blog early last week as the refineries begun being shut down: nice little kicker over that spread at the moment…

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