In the oil market, no country is an island. A supply disruption one place can have ramifications far away.
Take the recent shutdown of an oilfield in southwestern Libya and why that might matter in Primorsk, Russia or Ceyhan, Turkey.
On December 9, an armed group seized control of the Sharara oilfield (315,000 barrels per day), Libya’s largest.
A pipeline connects Sharara with the Mediterranean port of Zawiya where a refinery is also located. Crude inventories have been stable this month at around 3.6 million barrels (~50% capacity), according to Ursa measurements.
This lost production will be felt, first and foremost, in the Mediterranean/Urals crude market, to which Libya belongs.
The thing to watch for is significant draws of crude oil inventories at key sites. These sites fall into one of two categories — loading or off-loading ports – representing crude production and refinery demand, respectively.
Visualize the flows in this part of the world: You have big refineries in southern Europe which source their crude mainly from North Africa, the Caspian Sea, the Persian Gulf and Russia.
The crude grades that compete against each other include Azeri Light (Azerbaijan), Es Sider (Libya), CPC Blend (Kazakhstan), Kirkuk (Iraq), Saharan Blend (Algeria) and Urals (Russia).
The major loading points are located in Algeria (Skikda), Egypt (Sidi Kirir), Libya (As Sidr, Az Zuwaytinah, Ras Lanuf), Turkey (Ceyhan) and Russia (Primorsk, Novorossiysk).
Ursa uses synthetic aperture radar to measure crude oil inventories on a weekly basis at 150 locations around the world, including most of the key sites that comprise the Med/Urals market.
The two graphs below show inventories at key demand sites (Figure 1) and supply sites (Figure 2) for the latest reporting period ending December 13.
We’ll soon revisit these sites to give you the pulse on the Mediterranean/Urals market and how the Sharara closure may be impacting the region.