Crude Prices Hit High as Libyan Turmoil Roils Markets -Platts
The Libyan political crisis continued to send shock waves through oil markets Tuesday, sending ICE Brent crude futures to near two and a half year highs above $108/barrel amid confusion over the impact on physical oil flows into and out of the North African country.
Spain's Repsol said it has suspended production from the 200,000 barrels per day b/d Sharara oil field, one of Libya's key export crude grades, as foreign companies continued to withdraw workers from the country.
April ICE Brent settled Monday at $105.74/b, an increase of $3.22, but soared in post-settlement trading to top out at $108.57, its highest level since September 4, 2008. It has since sunk back to around $107/b.
There was no settlement price for NYMEX light sweet crude on Monday due to a US holiday, and the contract was trading Tuesday at around $93/b, up $6.80 from Friday's settle of $86.20, before the escalation in recent days of the uprising in Libya.
Other than the Repsol field, the status of Libya's upstream production is vague, but danger signs are growing.
For example, Edison, which is Italy's second biggest utility and has a contract to buy 4 billion cubic meters/year of gas via the Greenstream pipeline from Libya, says it has been told by supplier Eni that it "cannot guarantee" delivery of the contracted volumes.
GAS FLOWS TO ITALY THREATENED
An Edison source said Tuesday that the company had received a note from Eni regarding the Libyan volumes, although a day earlier Eni said its operations in Libya were normal.
On Monday, al-Jazeera television reported that crude production at the Nafoora oil field had stopped because of a strike by workers, hours after a tribal leader warned that oil exports from the OPEC state would be halted unless leader Moammar Qadhafi orders an end to the violent suppression of nationwide protests.
Most of Libya's oil exports of around 1.3 million b/d move to Europe, with Italy accounting for as much as one third of this volume.
Meanwhile, the list of companies that have evacuated workers from the country continues to grow.
US-based Marathon said it had evacuated some personnel, but that operations were continuing, a stance announced by several other companies. The stream of information on loadings went from no problems midday Monday to reports that all ports were shut by early Tuesday Libya time.
But by midday Tuesday, there have been signs that some exports are in fact continuing to make it into the market.
One ship owner told Platts he had encountered no problems in an attempt to load a crude cargo from the port of Es Sider.
"She berthed at 5:00 local time (0300 GMT), and is expected to sail later today/early tomorrow morning," said the ship owner. "One pilot went on board and everything is OK."
He added that a second Aframax tanker was due to load at the Libyan port of Brega around Friday.
Another industry source said the ports had all been shut Monday, but reopened Tuesday with the exception of Zuetina.
The unrest has dented domestic oil demand, this source said, prompting refineries to run at reduced rates. As a result, exports of naphtha and straight run fuel oil have also fallen, he said.
CONFUSION OVER OIL PRODUCT SUPPLIES
In one clear sign that the turmoil was affecting the country's ability to operate, term contracts and tenders to supply gasoline and gasoil to Libya are not being fulfilled, according to market sources.
Libya is currently contracted to buy between six to eight gasoline cargoes per month on a FOB basis from a number of Italian refiners, traders said. In addition, in February the country had bought between two to four cargoes of gasoil for CIF delivery into the country.
But due to the unrest, Libya was not sending vessels to the Italian refiners to collect the gasoline, one trader said. This could not
immediately be confirmed by Italian refiners or Libyan oil companies. Traders that won tenders to deliver oil products into Libya--as opposed to those whose tenders required the Libyans to send vessels to collect the cargoes--are uncertain as to what they should do.
"We have gasoil sales on a CIF basis but we don't know what to do," one trader said. "The situation is bad enough, I don't think we can sail our ships into a war zone."
"No one is answering the phones in Libya or at Libyan companies," the same trader added.
That uncertainty about sailing into Libya was expressed by others. A source with ship owner Icon Maritime said Tuesday that it had suspended its fleet from berthing or transiting in Libyan ports. "It is too risky," he said. But a source with another ship owner, UPT, rejected a blanket ban on Libyan ports, saying they would evaluate the situation as it progresses. "We will judge it on a case-by-case basis," a UPT source said. "[We will still send our ships] if there is a cargo and the port is judged to be safe." A ship broker who specializes in the Mediterranean also saw the issue as one of port avoidance rather than port shutdown. "We're assessing the situation now," he said. "We think many ships will [choose to] remain in international waters."
One place that seems unaffected so far is Libya's 220,000 b/d refinery at Ras Lanuf. The refinery, located on Libya's Mediterranean coast, is around 100 miles west of the city of Benghazi, one of the epicenters of the popular uprising against the government.
"It's difficult to get concrete information at the moment, the internet is cut off and phones are difficult," one trading source said. "But, from what we can gather, there are cargoes still there to load and the refinery is running so it sounds like business as usual."