Many refiners have yet to be fully won round to the idea of taking newly returned Libyan crude, helping to boost competing grades.

Light sweet crude prices are firming in the Atlantic basin, despite the return of over 1mn b/d of Libyan output. Grades such as Caspian BTC Blend, Nigerian Bonny Light, US WTI and Algerian Saharan Blend are trading around $1/bl higher against benchmark North Sea Dated than they were nearly two months ago (see graph). But the rise in values is not universal and sourer streams, such as North Sea Forties or Kazakh CPC Blend, have fallen slightly over the past two months. Increased demand from India is partly behind the higher values. But some refiners appear reluctant to take Libyan cargoes because of concerns over the potential for further disruption in the country.

The return of Libyan oil follows a ceasefire between the Libyan National Army (LNA) and UN-backed Government of National Accord (GNA) in mid-September. The deal ended an LNA blockade of ports and fields that had forced most of the country's production off stream in mid-January. Output has been rising steadily ever since, hitting 525,000 b/d on 19 October before more than doubling to 1.25mn b/d a month later. Libya is on track to export over 1mn b/d this month — in line with 2019 loadings — after shipping nearly 500,000 b/d in October. But much of this appears to be going to Italy and Spain, home to Eni and Repsol, both of which have shares in Libyan production.

Prospective buyers may be reluctant to rely on Libyan crude until there is more certainty around the oil sector. The ceasefire is holding but tensions are high. An armed group attempted to storm state-owned oil firm NOC's Tripoli headquarters on 23 November, before it was ultimately repelled by the Petroleum Facilities Guard and interior ministry forces.

Payment issues are also in flux. NOC says it will direct oil payments to the Libyan Foreign Bank rather than the Central Bank of Libya (CBL), until the latter can guarantee transparency over how it is using the revenues. Questions over the transparency of CBL's conduct were instrumental in the LNA's decision to blockade oil infrastructure in January. Its leader, Field Marshall Khalifa Haftar, has accused the bank of sponsoring mercenaries against him. His GNA counterpart Fayez al-Sarraj has also criticised the CBL's management of oil revenues.

Sider too sweet
Refiners are likely to be cautious about Libyan crude after so many months of downtime. The density of the key Es Sider grade has been fluctuating by up to 1.5°API since its return four weeks ago. Recent cargoes have been near 37°API, some market participants say, close to NOC's formal specification for the grade, but others say they have been well over 38°API.

The variances in Es Sider quality are probably the result of NOC subsidiary Waha Oil restarting various feeder fields at different times over the past four weeks. NOC removed force majeure restrictions at the Es Sider and Ras Lanuf export terminals on 23 October following the withdrawal of mercenary forces. Waha Oil delayed field restarts until some of the Es Sider crude being held in storage had been shipped out.

The extent of Libyan spot trade is otherwise uncertain. Turkish refiner Tupras has taken three cargoes of Es Sider by tender since mid-November, unconfirmed reports say. But this does not necessarily imply confidence in the new export source. Buyers that take crude through tenders are often more protected than companies that receive cargoes directly because of clauses allowing for acceptable replacement crudes to be substituted.

Light sweet crude vs North Sea Dated