Europe’s Largest Oil Refinery Disabled by Fire, Raising Fuel Prices Globally

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LONDON—The largest crude-oil refinery in Europe may not reopen until later this month after being knocked offline by a fire over the weekend, causing gasoline and other fuel prices to rise globally, according to Royal Dutch Shell RDS.B 0.55% PLC, the facility’s operator.

The Pernis refinery in the Netherlands has the capacity to produce 404,000 barrels a day of a variety of fuels. The loss is pushing up the already-rising prices of diesel, gasoline and other fuel products around the world, said Olivier Jakob from the Switzerland-based consultancy Petromatrix.

“This is only going to add to the fire,” Mr. Jakob said.

The refinery was shut down after a fire caused a power outage on Saturday, said Shell, which didn’t disclose the cause of the conflagration. A Shell spokesman said the facility would restart its operations in the second half of August “at the earliest.”

The loss of Pernis for weeks could cost Shell up to $2 million to $3 million a day, U.K. bank Barclays said. Rivals including Spain’s Repsol SA, Portugal’s GALP Energia SA and France’s Total SA will likely experience a short-term bump in profits while Shell works to get its refinery back online, Barclays said.

The company said the blaze resulted in no injuries, with the facility being shut down “in a safe and prompt manner.” The facility employs about 1,900 workers and about half as many outside contractors.

Recent strong demand for refined products in the U.S. coupled with refinery outages in Mexico and elsewhere have caused a deficit of gasoline and distillate products. Those forces were already causing gasoline and diesel prices to edge higher around the world.

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European diesel cracks—a proxy for regional refining margins—on the Intercontinental Exchange have hit their highest level since January.

The Pernis outage is going to accelerate the pace of those moves, analysts said. There is enough global refining capacity to meet demand even without Pernis, but “it takes time before these types of bottlenecks can be eliminated,” said Ehsan Ul-Haq, director of crude oil and refined products at Resource Economist Ltd., an oil-market consultancy.

“Once you start sending it to Europe there’s less diesel in other parts of the world, which results in higher prices there,” he said.

https://www.wsj.com/articles/europes-largest-oil-refinery-disabled-by-fire-raising-fuel-prices-globally-1501602534?mod=e2tw

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