Libya and Japan disruptions support light crude oils

25 March 2011 19:11  [Source: ICIS news]

LONDON (ICIS)--Light crude oils are being supported by a shortage of Libyan supplies and an increase in demand for low sulphur fuel oil from Japan, market sources said on Friday.

The decrease of light sweet crudes from Libya has created a shortage and resulted in an increase in the value of similar quality grades.

In addition, the loss of nuclear power in Japan will be partly compensated by an increase in output from power plants that use low sulphur fuel oil.

Nigerian grade like Bonny Light, which is light sweet and a good substitute for many Libyan grades, saw an increase in the price of its differentials to the benchmark Dtd (dated) BFOE to plus $4.00/bbl on 24 March from $3.20/bbl on 25 February.

Azeri Light, a light crude produced in Azerbaijan, has continued to increase from Dtd plus $2.60/bbl on 21 February to Dtd plus 4.20 on Friday.

The increase in the value of the light crudes has been a result of supply factors linked to the lack of Libyan crude and demand factors derived from an increase in demand for low sulphur fuel from the Japanese disaster, said Olivier Jakob, an analyst at trade advisory company Petromatrix.

Light crudes are economically preferable in the production of low sulphur fuel oil and this is driving up demand.

The earthquake and tsunami that hit Japan on 11 March, and the explosions at a nuclear power plant that followed, have further increased demand for low sulphur material.

Libya exports around 1.6m bbl/day of mainly light crude. With the conflict in Libya and the current embargo, there is no product coming out of the country.

One trader of West African oil said prices are high and partly this is due to an increase in demand from refiners trying to substitute Libyan supplies.

On Friday afternoon low sulphur fuel oil was trading at $669-672/tonne (€475-477/tonne) FOB (free on board) Amsterdam, Rotterdam, Antwerp (ARA), up from $622-624/tonne on 25 February.

In the futures markets, at GMT 17:40, May Brent was trading at $115.45/bbl, down $0.27/bbl from the close on Thursday, while May WTI was at $105.30/bbl, down $0.30/bbl.

($1=€0.71)

Additional reporting by Jo Pitches


By: Giovanni Coiro
+44 20 8652 3214



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