IEA says crude quality issues likely if Libyan outages persist
London (Platts)--25Feb2011/1021 am EST/1521 GMT
The International Energy Agency is already seeing evidence of additional
cargoes of crude oil from Saudi Arabia being made available to refiners in the
Mediterranean to make up the shortfall in supply from Libya, a senior IEA
official said Friday.
As the chaos in the Libyan oil sector shows no sign of abating, David
Fyfe, head of the IEA's Oil and Markets Division, said European refiners can
cope with the loss of Libyan crude in the short term.
"By our own numbers, we think there is substantial spare capacity in
Saudi Arabia, and we are pleased to hear they are willing to be flexible in a
situation where the market has lost supply," Fyfe told Platts in an interview.
"We are hearing reports of extra cargoes being made available as of today
and we have some confidence it is happening," he said.
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Refiners in Italy, Austria, France, Greece, Switzerland and Spain are
particularly affected by the disruption in crude exports from Libya, where
production has dropped sharply due to the civil unrest.
Fyfe said refiners would be able to cover themselves in the short term
and that the high level of spring maintenance was helping balance the market.
"All signals in the very short term are that the market can cope with
this. This is what we want to hear," he said.
"The impact on refining depends a lot of timing -- refiners are not
concerned in the short term as they have covered their commitments for March,"
"European refinery runs as a whole in February/March are 500,000-600,000
b/d down from their November highs -- so the spring maintenance season helps
in the short term," he said. "So it is less of a problem that it might have
Fyfe said nonetheless, refiners are looking at all options to replace
lost Libyan cargoes.
"There will be a lot of rejigging, a lot of reallocation in the system,"
"There are a lot of moving pieces, and there are likely to be arbitrage
cargoes from the North Sea, from West Africa. Refiners are looking at all
Fyfe said that beyond March, the IEA has heard refiners are looking at a
mix of supply options.
"We have heard from several refiners that they are mixing their sources
of supply for April and beyond -- and they are sure to be using their normal
inventories," he said.
Fyfe also said there could be quality issues for European refiners if the
Libyan disruption continues.
"If outages last into the longer term, there might well be quality
issues. Is there a one-for-one swap -- Libyan barrels for Saudi barrels? No
there isn't. West African cargoes will be the most interesting from a quality
perspective," he said.
Fyfe also said the IEA was ready to act if the Libyan disruption
"If it lasts longer, the IEA can respond pretty quickly. The IEA
strategic stocks are there if the physical liquidity in the market is not
there. We would have no hesitation in acting," he said.
--Stuart Elliott, email@example.com