Return of Libyan exports weighs on European crude market
By Ahmad Ghaddar and Robert Harvey
LONDON (Reuters) - A resumption of Libyan crude output after a political crisis over the central bank slashed the OPEC member's exports to a four-year low, has led to a surplus in crude supplies in Europe, forcing competing sellers to cut their prices, trading sources and analysts say.
Libya's National Oil Corporation (NOC) announced the restart of production on Oct. 3 after a new central bank governor was appointed. As of Oct. 13, output had reached about 1.3 million barrels per day, close to pre-crisis levels.
The timing of Libya's ramp up is coinciding with maintenance at European refiners with several plants in the Mediterranean and northwest Europe in full or partial shutdown. This is weakening the price of competing crude grades, traders and analysts said.
According to LSEG data, the premium of Azerbaijan's Azeri Light crude to benchmark dated Brent dropped to $1.55 a barrel, the lowest since April.
In the first 11 days of October, the differentials of other major Mediterranean crude grades – CPC Blend, Saharan and Libya's own Es Sider blends also weakened, FGE Energy analyst Sofia Pribludnaja said.
"Looking ahead, these Mediterranean grades will face more downside pressure from the second-largest field feeding the CPC Blend – Kashagan – returning from full shutdown due to maintenance after November 10," she added.
Prices for West African crude, also a substitute for Libyan barrels, could also weaken, a trader said. Nigerian Bonny Light was last week offered close to a premium of $1 a barrel to dated Brent and valued slightly below that, the lowest since December 2023, according to LSEG data.
Libya's central bank crisis started at the end of August, leading to the shutdown of several oilfields and ports. Libya's crude exports in September slumped to about 550,000 bpd, a four-year low, according to Kpler data, and half the average for July and August.
October exports so far have recovered to over 600,000 bpd and are expected to rise further.
One trader with a firm that usually buys from Libya and who declined to be identified said NOC was allocating cargoes to refiners that were for very imminent loading dates.
NOC did not immediately respond to a Reuters request for comment.
Refiners had already made alternative arrangements to buy other grades, assuming that the Libyan outage would last longer, he added.
A second trader said refiners in Europe will still take in Libyan cargoes but are in a position to demand hefty discounts. Reuters could not confirm deal levels which are usually transacted on a confidential basis.
Italy is the biggest buyer of Libyan crude, accounting for a third of all exports in 2023, followed by Spain, France, the United States and Greece, Kpler data show.
(Editing by Alex Lawler and Alexandra Hudson)