India announced restrictions on gasoline and diesel exports Friday, in a move that could further tighten global oil product markets. The country exported 1.4mb/d of gasoline and diesel in May, and the government would like to see more product sold into the domestic market. The new system imposes a nominal export tariff on product, but ensures refiners sell a minimum percentage of production into the domestic market. Reliance Industries, India’s largest refiner and exporter, saw shares fall as much as 9% following the news.
In related news, Exxon (XOM) announced it will temporarily shut its Fos-sur-Mer refinery in France, while the union at the ~140kb/d plant goes on strike. Exxon (XOM) has declared force majeure for some products, as inventory levels are seen as inadequate to meet local demand. Earlier in the week, a lightning strike knocked out Germany’s Bayernoil refinery, a 206kb/d plant that is set to be offline for several days while damage is assessed. And in Venezuela, the nation’s second largest refinery halted gasoline production due to a reformer outage. The reformer is undergoing maintenance and is expected to be back up in 18-21 days.
Refining stocks have been under pressure, as diesel margins in Asia fell $22 this week, while margins in Europe fell ~$12. Although margins remain elevated, inventory is beginning to build in the US. Whether strikes, outages, and export controls are enough to turn margins around remains to be seen; however, refiners (MPC) (VLO) (PSX) are sure to post record profits later this month.