The ongoing shutdown of Libyan oil exports is benefiting several crude oil grades, including Azeri, African, and U.S. grades. However, it may also lead some refiners to reduce their crude intake due to shrinking profit margins, according to Reuters.
Patricio Valdivieso from the consultancy Rystad Energy noted that for October shipments, refiners are likely to choose Azeri and Algerian Saharan Blend as substitutes for Libyan oil. U.S. WTI Midland might also temporarily replace Libyan supplies, Reuters reported.
Following the Libyan disruptions last week, prices for Azeri and Kazakh crude have surged as refiners sought alternative sources. In August, European imports of WTI Midland reached 1.43 million barrels per day, a 24% increase from the previous month, partly due to Libyan outages. The price of U.S. WTI Midland crude has risen relative to WTI, with the price gap widening to 80 cents per barrel from 60 cents before the Libyan shutdown.
“Kpler analyst Matt Smith explained that U.S. crude serves as a good replacement for the light sweet Libyan barrels and can be transported relatively quickly across the Atlantic,” Reuters reported.
The shutdown has also led buyers to seek West African crude, which had previously been less popular due to low refining margins and scheduled maintenance. Kpler lead crude analyst Viktor Katona observed that while there was a surplus of Nigerian cargoes for September, the fact that price differentials have not dropped significantly suggests that the Libyan situation has affected the West African market as well.
Libya has not resumed oil exports two weeks after the Haftar clan blocked production to gain leverage in a conflict over control of the Central Bank. Six engineers informed Pan-Arab newspaper Asharq-Al-Awsat that exports remain halted at the ports of Es Sidra, Ras Lanouf, Hariga, Zueitina, Brega, and Sirte. Some production is being increased to support local power generation and alleviate fuel shortages.
S&P Global reports that up to 230,000 barrels per day of crude output has been restored at three eastern fields controlled by warlord Khalifa Haftar, though this is significantly below Libya’s output of 1.15 million barrels per day in July. Libyan crude exports had reached multi-year highs in April, with refiners in Northwest Europe and the Mediterranean valuing Libyan light sweet crude highly.