European oil prices have climbed as fears about supply disruptions through the Red Sea and from Libya prompt refiners to rush to secure cargoes.
Spot prices for North Sea and Mediterranean crudes have become much more expensive than global benchmark Dated Brent in recent days. That’s happening as Houthi attacks on commercial vessels threaten trade through the key Red Sea waterway and Libya’s biggest field suffers from a prolonged shutdown.
European refiners are increasingly worried about possible delays in flows from Middle East — especially Saudi Arabia and Iraq — amid the escalating tension. More tankers are diverting away from the Red Sea, adding to cargo costs and tightening the global fleet. Plus, there are bottlenecks in CPC crude loadings in the Black Sea and the risk of a cold blast in Texas disrupting shale operations.
Forties, one of the six grades used to set Dated Brent, on Monday fetched a premium of $1.45 a barrel to Dated on a pricing window run by S&P Global Commodity Insights, better known as Platts. That compares with a discount of 20 cents 10 days ago. Azeri Light, the most popular grade among Mediterranean refineries, jumped almost $1 from late last week to a premium of about $6.50.
Production at Libya’s Sharara oil field remains shut by protesters, while loadings of Azeri Light are expected to fall to an 11-month low in February. Together, about 200,000 barrels a day of exports will be lost from those two main sources.
In the Black Sea, deliveries of CPC Blend remain severely delayed by bad weather. More than 10 tankers have yet to leave the area after loading, according to port agent reports.
Prices of prompt barrels from West Africa are also being supported by the Libyan and Red Sea supply issues, as well as improving sales to India and China, traders said. Angola’s crude for February loading has sold at a faster rate than in recent months, according to estimates from traders last week.
Still, the market isn’t as tight as three or four months ago, when plunging US supply sent global physical prices surging. More US crude is likely to be shipped to Europe in the coming weeks as the arbitrage to Asia is temporarily closed.
Asia’s physical crude market has also been relatively steady following a spike in prices of Middle Eastern barrels earlier this month due to higher freight rates. While Red Sea tensions have likely affected the appetite for cargoes from Kazakhstan — and possibly Russian shipments for buyers in India and China — spot differentials of Persian Gulf grades haven’t jumped from a week earlier.
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