Libyan crude differentials to Dated Brent have pushed up above the October official selling prices over the last week, trading sources said, as strong Mediterranean sweet crude demand and growing confidence in the country's reliability prompted an increase in demand.
On Wednesday, Platts assessed FOB Es Sider Aframax cargoes at a $1/barrel discount to the Mediterranean Dated Strip, its highest level relative to the 13-28 day forward Dated Brent curve since the grade resumed loading in August after more than a year of near-constant disruption.
Wednesday's assessment was a full $0.10/b above the October OSP of $1.10/b set by state-owned National Oil Company.
Traders said the upswing in differentials has not been limited to distillate-rich Es Sider, but has carried across the country's slate of sweet crude exports.
"El Sharara, Mellitah, Brega and Abu Attifel...these grades have all [seen] an increase in premiums," a trading source said.
The majority of Libya's land-based crude exports are sweet, ranging from naphtha-rich grades like Mellitah and Sharara, which are direct competitors to Algeria's Saharan, to more distillate-rich crudes like Es Sider, which is seen as a frequent substitute for Azerbaijan's Azeri Light, Russia's Siberian Light, or even, for some end-users, Russia's Urals.
Earlier this week, Turkey's Tupras reportedly tendered for either an Aframax cargo of Urals or of Es Sider, ultimately settling on the cargo of Es Sider.
"Some refiners could prefer Es Sider over Urals -- it's pushing out Azeri [demand] for some and Urals for others," another trader said. "It's not the same grade, but it is filling some gaps."
Market sources said market confidence in the reliability of Libyan grades has been improving, despite the ongoing political unrest in the country, as disruptions to the country's petroleum sector has proved minimal since production restarted in earnest this summer.
Production in the country is currently hovering around 900,000 b/d.
However, market sources said part of the increase in demand has been driven by the surge in sweet crude differentials across the Mediterranean, as strong refinery margins at the prompt have led to a surge in buying interest, pushing differentials for Azeri Light, Saharan and CPC Blend up to multi-month highs.
"People are now diversifying into Libyan," a crude trader said. "CPC and Azeri got too strong for people and they are now willing to take that Libyan risk because Libyan is so cheap versus Saharan...Saharan is now around plus $0.70/b, so why wouldn't you buy Mellitah if it's so much cheaper."
