Freight premiums for Aframax and Suezmax tankers loading from Libya have subsided as the North African producer has once again emerged as the main export hub in the Mediterranean crude market. Freight rates for voyages out of Libya have been priced at a premium over standard cross-Mediterranean Aframax assessments in the last six months amid geopolitical uncertainty and prompt laycan dates. However, the premium on Aframax and Suezmax tankers has narrowed since late February, according to S&P Global Platts data. The Aframax Libya-to-Mediterranean run was assessed at w92.5 on March 4, on par with the Ceyhan-to-Mediterranean run. “Libyan port costs are cheaper than what you would get from a vanilla [standard] cross-Mediterranean run,” a charterer said. “In addition, Libya’s output is steady and there is little uncertainty now.”
Market participants said premiums for Libyan loadings had averaged between w2.5 and w5 points for Aframax tankers prior to the oil blockade, as several owners were reluctant to load at Libyan ports. However, since the production cuts by OPEC+ members and lower freight rates, fewer owners have been selective, hence increasing the pool of tankers available for fixing, sources said, narrowing the premium even more. Premiums on Suezmax tankers were also reported to have shrunk. Recent fixtures on the Mediterranean-to-East run showed slim premiums of $50,000 for Libya loadings compared with other loading ports in the Mediterranean, according to Platts data.
Libya top exporter in Mediterranean basin
Since December, Libyan output has fallen slightly due to problems arising from aging infrastructure and grievances over salary payments to the Petroleum Facilities Guards, which led to a halt in crude exports from some of Libya’s key eastern terminals. Libya’s oil sector also took a recent hit when some buyers canceled purchases of Amna, Abu Attifel and Zueitina grades after high mercury levels were detected in the cargoes. High levels of mercury can be very toxic, posing concerns for refiners due to potential damage to refining units. However, the situation has been resolved, according to trading sources.
Freight rates draw support from Libyan production
Tanker owners in the Mediterranean basin welcomed the comeback of exports from Libya after the eight-month blockade. “The comeback of Libya was a relief for the oil tanker market amid production cuts and low demand from end users,” a broker said. “However, it did not prevent owners from seeing negative earnings a few times since June 2020.” Premiums for Libyan Aframax fixtures were reported reaching as high as w30 points over cross-Mediterranean runs in September. The premium has since fallen back as geopolitical uncertainty eased and cargo output rose. Libyan port costs were reported between $12,000 and $130,000 for Aframax tanker loadings, with Zawia and Zueitina remaining the most expensive. “The fact that two big tanker owners still refuse to load Libyan cargoes has maintained the premium in the last few months, preventing freight rates from Libya from going lower,” a second charterer said. In addition, remote pilotage was reported to be only available at the ports of Es Sider, Farwah, Ras Lanuf and Bouri, hence increasing the costs for loading at other ports as the pilot must come onboard to moor the vessel.