London (Platts)--31Jan2013/1034 am EST/1534 GMT

Improving refining margins along with stronger gasoline and middle distillate cracks are rekindling buying interest for some light sweet crude grades in Europe and West Africa, traders said Thursday.

This has led to a substantial jump in prices for sweet barrels and the two grades that best illustrate the increase are Azerbaijan's Azeri Light and Nigeria's Qua Iboe.

Healthy distillate cracks and good global demand has helped Azeri Light buck the trend of other Mediterranean light sweet crude grades, traders said. Azeri Light reached another a year-to-date high Wednesday for the fourth straight trading day.

"Azeri always runs quite well in the Med," a market source said. "Everyone will continue to buy Azeri."

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Part of that strength stems from the global nature of the grade, as much of is exported to Asia, leaving regional refiners willing to pay for the grade when a spot cargo appears, particularly when healthy distillate cracks prevail.

Azeri was heard offered at a premium to Dated Brent of $3.80/b, with some talk that offers may be moving even higher.

One market source, however, said gasoil "cracks are good, but not good enough to support Azeri at $3.80/b."

In addition, with most Libyan grades moving higher, according to the February OSP's which were released this week, Azeri Light is expected to move higher.

Azeri Light has been linked to the values of some Libyan grades and was already moving higher when the securing of Libyan cargo lifting dates was delayed earlier in January.

Stronger gasoline cracks also have boosted demand for the Nigerian lighter grades, and Qua Iboe, which is the flagship grade for Nigeria, has been edging up. As a result almost all the other Nigerian grades were seeing a slight uptick in differentials.

"We have almost 10 of the 12 cargoes covered. It was a little surprising that they sold so fast, but margins are better and gasoline strength is providing some support. I am hearing offers for Qua Iboe are now around $2.80/barrel to $2.90/barrel," said a trader.

Platts on Wednesday assessed Qua Iboe at plus $2.365/barrel over Dated Brent.

Differentials have risen 30 cents since Friday and this is the highest differential seen on this grade since January 9 this year, Platts data show.

--Eklavya Gupte, eklavya_gupte@platts.com and Robert Mayer, robert_mayer@platts.com
--Edited by Jeff Barber, jeff_barber@platts.com

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