London (Platts)--28Feb2011/845 am EST/1345 GMT

Some Mediterranean gasoline intended for delivery into the Libyan market has been diverted to the US because of the ongoing upheaval in Libya that has led to force majeure on product imports, market sources said Monday.

The gasoline is heading for the US East Coast, which is a net importer of gasoline, sources said. The product, which has been marked for loading in March, was converted to meet Eurograde specifications, a grade that is commonly imported into the USEC.

Sources said Libyan gasoline has oxygenates and high sulfur content, compared with supplies that go into the US market which is non-oxygenate and with 30 ppm sulfur content.

Libya typically imports between five and eight gasoline cargoes a month, mostly on an FOB Mediterranean basis. The buyers would then have to charter ships to load that material from their suppliers and bring them over to Libya.

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But with refineries not in operation because of the turmoil the country may need to import well in excess of that volume to make up for the shortfall.

Libyan ports are currently shut however, and operators of those facilities have told vessels not to come, sources said.

The upheaval in Libya would likely also cause insurance companies to charge more to cover the heightened risk involved in traveling to such areas, sources said.

One source recollected that when Nigeria saw similar unrest last year, their insurance premiums for shipping to that area rose, with the "war premium" billed at $700,000 a week.

As of last Tuesday, marine insurers Lloyds said shipping insurance premiums for vessels headed for Libya have yet to reflect the turmoil in the country.

Fundamentally, the market in the Mediterranean remains well supplied even with product being diverted to the US.

At the close on Friday, Platts assessed cargoes FOB Med at a premium of $11.75/mt to EBOB barges basis Amsterdam-Rotterdam-Antwerp.

One week earlier, this same spread was assessed at $20.50/mt, demonstrating the current weakness of gasoline demand in the Mediterranean compared with Northwest Europe.

"The market in the Mediterranean is getting longer and longer," said a market source on Monday.

"With Libya not buying you have length from refineries too," the source continued.

Italian refiners typically supply between five and eight cargoes into Libya each month while sources alluded to further run cuts given that force majeure on Libyan imports will reduce outlets for Mediterranean supply.

Italian oil major Eni's 105,000 b/d Gela refinery in Sicily has been on maintenance since the beginning of February and Italy's ERG started maintenance at its 225,000 b/d ISAB South refinery on January 28 for around 40 days.

--Sheela Tobben, sheela_tobben@platts.com

--Richard Turner, richard_turner@platts.com