Libya has declared force majeure on most of its crude exports. Image Credit: File Image / Pixabay
A blockade on Libyan oil production is set to take 1 million b/d out of the Mediterranean sweet crude market, potentially driving a sharp increase in very low sulfur fuel oil (VLSFO) prices in the region.
Libya's National Oil Company (NOC) declared force majeure on exports from five major ports on Saturday after the self-styled Libyan National Army imposed a blockade.
"When storage tanks are full in a few days, Libya's oil production will be limited to 72,000 b/d from offshore fields and Wafa oil field, from over 1.20 million b/d yesterday," price reporting agency S&P Global Platts cited an NOC spokesman as saying Sunday.
An outage on that scale would have a significant impact on the market for low-sulfur crudes in the Mediterranean.
That would have a knock-on effect for VLSFO pricing in the region, as Libyan crude produces a high yield of the middle distillate components used for low-sulfur marine fuel blending.
On Friday delivered VLSFO prices at Gibraltar were assessed at $608.50/mt, compared with Rotterdam's level of $531.50/mt.