Algerian Crude Rises to Five-Month High on European Refining

  • Libya's failure to ramp up oil output boosts Algerian price
  • Nigeria's crude fared less well as Asia's market weakened

Oil from OPEC-member Algeria is selling at its highest premium to the Brent crude benchmark in five months amid strong demand from European refineries.

The North African country’s Saharan Blend official selling price was set at a 75-cents-a-barrel premium to Dated Brent for September, compared with a 45-cent premium in August and a 20-cent discount in July.

Algeria's Saharan crude oil as a differential in US cents over or under Brent crude; Brent prices in US dollars
Algeria's Saharan crude oil as a differential in US cents over or under Brent crude; Brent prices in US dollars
Bloomberg data

“High refinery margins have kept demand up from European refineries, giving support to Algeria’s crude as Libyan crude is lacking,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Denmark.

European and Mediterranean Refinery outages fell in August; utilization increased
European and Mediterranean Refinery outages fell in August; utilization increased
Bloomberg data

The premium of European gasoline prices to crude has risen to a monthly average of about $24 a barrel, the highest since May 2007, consultant IHS Inc. said in a report Friday. War-torn Libya, Algeria’s neighbor and also a traditional supplier to the European market, is pumping crude at about a quarter of the rate prior to the uprising against Muammar Qaddafi in 2011 as export terminals remain shut down due to insecurity.

Libya's crude output is less than half its Oct. 2014 level
Libya's crude output is less than half its Oct. 2014 level
Bloomberg data

The price of Algerian crude has held up better than similar-quality crude from Nigeria, a fellow member of the Organization of Petroleum Exporting Countries. The West African nation has been hurt by weakening demand from Asia, where it is trying to sell crude displaced from the U.S. market by shale oil, said Robin Mills, a Dubai-based analyst at Manaar Energy Consulting.

The selling price of Bonny Light, Nigeria’s main export grade, was set at a 35-cent-a-barrel premium to Brent in August, lower than Saharan blend for the first time since March.

Algeria's light crude costs 10 cents more than Nigeria's
Algeria's light crude costs 10 cents more than Nigeria's
Bloomberg data

“Shaky Asian demand has hit Nigeria more than Algeria, given Algeria exports
mostly to Europe,” said Mills.

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