Azerbajian's Azeri Light crude has dipped in value recently despite a shorter November loading program, with cargoes struggling to find buyers in November in large part because of competition from the return of Libyan barrels to the market, trading sources said.
"Everyone is covered. They covered with Libya, which is cheaper than Azeri...as long as they load, and as far as we know, Libya is on track to load," one sweet crude trader said.
Another factor exerting pressure on Azeri Light has been weakness in North Sea barrels, which are being arbitraged into the Mediterranean, sources said.
S&P Global Platts assessed Azeri Light Thursday at a premium of $1.45/b to the BTC Dated Strip, 35 cents/b below its highest point in the November trading cycle, at $1.80/b, seen on October 24.
There are around 8-10 Azeri Light cargoes available in the the third decade of November, a larger proportion than would typically be seen at this point in the trading cycle, market sources said.
"Margins are good on Azeri but the amount of [remaining] cargoes is weighing heavily," a second sweet crude trader said.
A third crude trader said Mediterranean buyers have been looking at the closer cross-Mediterranean voyage for their sweet crude needs. "Some buyers are taking Libyan and, so, Azeri has been hit by the higher [Libyan] production...there is a risk [to buying Libyan] but it is cheaper. So, for the time being, some buyers are covering [Azeri Light buying] with other grades."
"You see high margins and contango in the market, but now we also have to consider the totality of the oil there is in the market," a fourth sweet crude trader said. "We do see a lot of Azeri Light and CPC in the second half of November, plus at least 3-4 cargoes of [Libya's] Es Sider to be placed."
Es Sider continues to be on track to export its first cargoes in almost two years in the next couple of weeks, market sources said, with three cargoes currently estimated to load out of nearby Ras Lanuf terminal due to continued maintenance on the fire-damaged Es Sider port terminal.
"Es Sider is seeing more [flows] already than expected," the second sweet crude trader said.
Before its flows became sporadic due to civil war in the country, Es Sider was one of the main competitor grades to Azeri Light in the Mediterranean.
Additionally, other Libyan crudes such as Amna, Mesla and Sarir, which have been loading more regularly over the past few months, have also eaten into demand for sweet crude, trading sources said.
"Buyers are moving away from the market. The usual buyers for Azeri have covered themselves with North Sea cargoes and Libyan cargoes, Sarir and Amna primarily," the second trader said.
Market sources said around 50,000 b/d of Es Sider was being pumped, along with around 100,000 b/d for Amna, and 60,000-70,000 b/d for Mesla/Sarir.
Taking into account smaller fields and offshore oil, current estimates for overall Libyan crude production are around 550,000 b/d, according to recent Libyan oil ministry numbers and market sources.
