Shell, union resume contact on second day of refinery strike

HOUSTON (Reuters) - Royal Dutch Shell Plc said late on Monday it resumed contact with the union representing workers at U.S. refineries as a strike stretched into a second day after talks on a new national contract broke down.

Walkouts called on Sunday at nine plants with a combined 10 percent of U.S. refining capacity were the first since 1980 in support of a nationwide pact that would cover 63 refineries.

Contract talks broke down on Sunday with workers asking for higher wages against a backdrop of crude prices that have plunged nearly 60 percent since June, prompting oil companies to cut spending.

"Representatives from Shell and the United Steelworkers union (USW) resumed communications on Monday in hopes of coming to a mutually satisfactory contract agreement," said Shell spokesman Ray Fisher.

A USW representative was not immediately available to discuss Shell's statement or say if negotiators were at the bargaining table.

Most affected refineries were running almost as usual, with operators having called on trained managers to replace workers.

But one of the affected plants, Tesoro Corp's 166,000-barrel-per-day Martinez, California, refinery, was being fully shut down, since part of it was already in the midst of planned maintenance work.

While refiners are promising little or no disruption to production, wholesalers and other buyers are skittish and snapping up available supplies.

U.S. gasoline and diesel fuel prices rose on Monday on concerns over supply, as well as a bounce in U.S. benchmark crude to about $50 a barrel .

Gasoline futures traded in New York rose more than $0.05 to $1.53 a gallon, though retail gasoline prices are still at their cheapest in years after having fallen about 40 percent since the middle of 2014.

The USW has said Shell, the lead industry negotiator, halted negotiations early Sunday after the union rejected a fifth proposal from the company.

Shell activated a strike contingency plan at its joint venture refinery and chemical plant in Deer Park, Texas, to maintain operations.

Tesoro said management was operating its refinery in Carson, California, and its plant in Anacortes, Washington.

The USW also called strikes at three plants belonging to Marathon Petroleum Corp in Texas and Kentucky, and LyondellBasell Industries NV's plant near Houston. At least two of the plants on the list have a history of deadly accidents.

The USW said all other refineries it represents would operate under rolling 24-hour contract extensions.

The expiring three-year national contract covers about 30,000 hourly workers at plants that together account for two-thirds of U.S. refining capacity.

The union is seeking annual pay increases of 6 percent, double the size of those in the last agreement. It also wants work that has been given in the past to non-union contractors to start going to USW members, a tighter policy to prevent workplace fatigue and reductions in members' out-of-pocket payments for healthcare.

Independent refiners, such as Valero Energy Corp , have made big profits recently by tapping cheap crudes from the U.S. shale boom, while refining units at integrated companies such as Exxon have provided a cushion against low prices hurting upstream operations.

But the drop in oil prices from more than $100 per barrel last summer has hurt the union's hand, analysts said.

(Additional reporting by Jarrett Renshaw; Writing by Terry Wade; Editing by Jeffrey Benkoe, Alden Bentley, Steve Orlofsky and Cynthia Osterman)

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