NEW YORK--(BUSINESS WIRE)--The United Steelworkers (USW) strike, which has entered its second month and expanded to 12 refineries, has had a limited overall impact on refined product markets thus far but may become an issue if it is prolonged, according to Fitch Ratings. This is especially true with regard to the US gasoline market.
The overall impact of the strike has been blunted by several factors: 1Q is typically a low demand shoulder period; there remains adequate refined product inventories (with gasoline inventories at 240 million barrels as of the end of March, above their five-year range); and companies (so far) have been able to run most striking refineries using contingency plans. However, a prolonged strike could tighten up supply balances -- particularly gasoline -- as the US heads into its peak driving season (Memorial Day to Labor Day). A prolonged strike would have case-by-case effects on the company level, depending upon which of a company's refineries were affected, what the effects were on individual plant utilization rates, and how much crack spreads move up in response to a strike for the rest of the market.
As estimated by Fitch, the percentage of refining capacity by company that is covered by a USW contract ranges from high levels (Motiva [100%]; Tesoro [77%]; PBF [68%]) to lower exposures (Phillips 66 [12%]; Valero [22%]). Entities with middling exposure include CITGO (43%) and Marathon Petroleum Corp (45%). It is important to note that these calculations refer simply to the amount of crude distillation capacity (by refinery) that is covered by a union contract, not to whether individual refineries are experiencing or are expected to experience a strike.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.