Oil prices in Europe have risen as fears over supply disruptions across the Red Sea and from Libya they encourage refineries to hurry to secure shipments.
Spot prices for North Sea and Mediterranean crude oil have become much more expensive than the global benchmark Dated Brent in recent days. This is happening as Houthi attacks on commercial ships threaten trade through the important Red Sea waterway. and Libya’s largest field suffers a prolonged closure.
European refiners are increasingly concerned about possible delays in flows from the Middle East – especially Saudi Arabia and Iraq – amid escalating tensions. More and more oil tankers are being diverted from the Red Sea, increasing cargo costs and shrinking the global fleet. Additionally, there are bottlenecks in CPC crude oil 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 fix Dated Brent, hit a $1.45 per barrel premium to Dated on Monday in a pricing window run by S&P Global Commodity Insights, better known as Platts. That compares to a 20 cent discount 10 days ago. Azeri Light, the most popular grade among Mediterranean refiners, jumped almost $1 since late last week to a premium of around $6.50.
Production at Libya’s Sharara oil field remains shut down by protesters, while Azeri Light shipments are expected to fall to their lowest level in 11 months in February. Together, around 200,000 barrels per day of exports from these two main sources will be lost.
In the Black Sea, CPC Blend deliveries remain severely delayed due to bad weather. More than 10 tankers have not yet left the area after loading, according to reports from port agents.
West African fast barrel prices are also supported by Libya and Red Sea supply issues, as well as improved sales to India and China, traders said. Angolan crude for loading in February has been sold at a faster pace than in recent months, traders estimated last week.
Still, the market is not as tight as it was three or four months ago, when the fall in American supply drove up prices global physics. 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 oil market has also remained relatively stable following a rise in Middle East barrel prices earlier this month due to higher freight rates. While tensions in the Red Sea have likely affected appetite for Kazakh cargoes (and possibly Russian shipments for buyers in India and China), spot spreads for Persian Gulf grades have not increased from the previous week.
