LONDON: Diesel refining margins in northwestern Europe strengthened for a second session on Tuesday, with ICE futures extending their rally to almost 13 percent since the weekend as talks to stop strikes at several US refineries faltered.
Union workers in nine US refineries and chemical plants went on strike on Sunday to push for a new national contract, raising concerns over supply disruptions from one of Europe's biggest diesel suppliers.
Talks between the United Steelworkers union and lead industry negotiator Shell made little progress late on Monday, union officials said, with a combined 10 percent of US refining capacity facing industrial action. It was not clear if talks had resumed on Tuesday.
The supply threat has jolted a European market that relies on the United States for much of its diesel supplies. Still, if a quick deal is reached, analysts cautioned prices may be quick to fall back.
"Unless these strikes curtail output at the other facilities (the) rally in product futures has very little fundamental support to stand on," analysts at JBC Energy in Vienna said.
Traders said in the short run they were not prepared to risk being caught short, with around 500,000 tonnes of diesel originally expected to flow from the United States to Europe in February.
The move has also boosted US diesel prices, with the NYMEX ultra-low sulphur diesel contract up 3 percent on Tuesday to the highest since the start of January. Demand in Europe also rose in recent days as colder weather increased heating oil buying, traders said.
The rally in flat prices has brought out some sellers, however.
Greek refiner Hellenic Petroleum issued a tender to sell 30,000 tonnes of 10 ppm diesel for delivery this month, traders said on Tuesday.
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