February 2, 2015 / 12:56 PM / 3 years ago

UPDATE 3-Strike by U.S. refinery workers extends to 2nd day

(Adds managers running Tesoro Anacortes plant)

By Erwin Seba

HOUSTON, Feb 2 (Reuters) - A labor strike that some fear could affect gasoline production at several of the largest U.S. oil refineries and chemical plants stretched into a second day on Monday, as union workers sought a new national contract.

The walkouts - 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.

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.

The other refineries were running mostly as usual as operators initiated contingency plans, calling on trained managers as replacement workers.

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

"In the short term, the strikes are definitely driving prices up," said Phil Flynn of Price Futures Group in Chicago.

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 United Steelworkers union (USW) said Royal Dutch Shell Plc , the lead industry negotiator, halted negotiations early Sunday after the union rejected a fifth proposal from the company. Shell said it would like to restart talks.

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

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

The USW also said strikes were called 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, including Exxon Mobil Corp's plant in Beaumont, Texas, 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 latest rejected proposal was the fifth turned down since negotiations for a new three-year contract began on Jan. 21.

The union is seeking annual pay increases 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.

The union chapter at LyondellBasell said the company brought 10 issues to the table and did not want to discuss all of the 36 points raised by the union.

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 and Steve Orlofsky)

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