Libya oil shutdown boosts US grades

The continued shutdown of Libyan crude exports is proving beneficial for some crudes, including Azeri, African and US, but could prompt some refiners to cut their crude consumption altogether due to tight profit margins, Reuters he reported.

According to Patricio Valdivieso of consultancy Rystad Energy, Azeri and Algerian Saharan Blend will be top refiners’ choices for Libyan replacements for October cargoes, while the U.S. WTI Midland could replace Libyan volumes in the short term, Reuters reported.

Azeri and Kazakh crude prices have risen since disruptions in Libya last week as refiners sought spare barrels. Meanwhile, European Midland WTI imports reached 1.43 million barrels per day in August, good for a 24% month-on-month increase, supported in part by disruptions in Libya. U.S. WTI Midland physical crude prices firmed against WTI, with the price difference between the two grades widening to 80 cents a barrel from 60 cents just before the shutdown of Libyan oil fields.

“American crude is a good substitute for sweet and light Libyan casks and can make the trip across the Atlantic fairly quickly,Kpler analyst Matt Smith told Reuters.

The outage also encouraged buyers to turn to West African crude, which had previously sold poorly due to low refining margins and upcoming maintenance.

“There was a huge surplus of Nigerian commodities for September, so the fact that spreads have not narrowed much is a sign that Libya has impacted the West African market as well.l,” Kpler chief crude oil analyst Viktor Katona told Reuters.

Libya has yet to resume oil exports two weeks after the Haftar clan stalled production in an attempt to gain leverage over a battle for control of the Central Bank. Six engineers told the pan-Arab newspaper Asharq-Al-Awsat that exports remained halted at the ports of Es Sidra, Ras Lanouf, Hariga, Zueitina, Brega and Sirte, although some production increased to feed local energy production and to reduce the fuel shortage.

According to S&P Global, crude oil production up to 230,000 bpd was restored in three eastern fields under the control of warlord Khalifa Haftar, a far cry from Libya’s output of 1.15 million b/d in July. Libyan crude exports hit multi-year highs in April, with refineries in northwest Europe and the Mediterranean appreciates light Libyan sweets.

By Alex Kimani for Oilprice.com