Libya is regaining its competitive edge selling crude to Europe after steeply cutting price formulas to avoid a repeat of the forced production cuts it faced in June because of a stand-off over pricing with buyers.
Demand for Libyan crude has been lackluster at best in the last few months as lifters have been complaining for six months that official selling prices (OSP) have been too high and ignoring market trends.
“All our term clients without any exception were not comfortable at all with our OSPs since June,” said a senior marketing official at Libya’s National Oil Corporation (NOC).
The high OSPs have particularly disappointed big trading houses, which provided the rebel forces with fuel throughout last year effectively helping them to win a civil war.
The pricing stand-off reached its peak last month when a major glut in Europe sent prices for sweet light crude grades, similar to Libyan oil, to record lows.
Buyers of Libyan oil had minimised purchases to such lows that NOC was forced to cut oil output by a fifth or 300,000 barrels per day.
“OSPs were part of the story but there were other factors like protests and power shortages, which have more effect on production rates then prices,” the NOC official added.
Europe, the main destination for Libyan crude, has been facing a glut of high quality crude oil grades for much of this year, with a struggling refining industry and falling United States imports due to the shale oil boom.
Spot prices on Algeria’s Saharan Blend and Kazakh CPC Blend hit a floor in June when they traded at dated Brent minus $3.30 and minus $4.35 a barrel, respectively.