North Sea Crude-Forties eases, VLCC options narrow

Joseph Keefe
Thursday, April 17, 2014

Forties trades at parity with dated Brent; Competing Libyan barrels returning to market. Refining margins under pressure as capacity ramps up.

North Sea Forties crude differentials eased on Thursday as the market remained sluggish ahead of the long Easter weekend and the window of opportunity for VLCC voyages to Asia narrowed.

Some traders said that the VLCC Phoenix Vanguard, which is currently off Fawley, UK, would still go to Hound Point to load Forties for South Korea around April 23. This would make it the last VLCC to load before Jetty 1 closes for two months of maintenance work.

With little chance of arbitraging barrels to Asia in May and June, traders expect the supply of competing crudes such as Urals to drive North Sea crude values in coming weeks.

OMV has fixed the 80,000 tonne Amalthea to ship Ekofisk from Teesport to Trieste, loading around April 26-27, according to shipping fixtures.

Mediterranean refiners have been buying North Sea crude in the last few weeks as they return from maintenance, because they need a substitute for missing Libyan barrels.

However, Libyan oil ports are slowly reopening, with a tanker loading at Hariga on Wednesday, the first time in nearly nine months. This is likely to choke off demand for North Sea crudes from Mediterranean buyers.

For refiners in northwest Europe, the picture is more complex. Refining margins have been relatively strong over the last 15 days at $5.80 a barrel, according to Reuters' data.

But as more refiners return from maintenance, margins will come under pressure. Analysts at JBC Energy estimate that runs will increase by 320,000 barrels-per-day month-on-month, increasing demand for crude feedstock.

"However the resulting higher product output, coupled with high Russian and U.S. product exports, are likely to negatively weigh on margins and we see May runs at around 9.7 million bpd, with the risks skewed to the downside," they said in a note.

FORTIES


* Chevron sold a Forties cargo loading on May 4-6 to Shell at parity with dated Brent.

* This was below the last trade, which came on Tuesday at dated plus 15 cents for May 7-10 Forties.

Reporting by Claire Milhench

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