Libya May Offer Deeper Crude Discounts After Sale Fails

Libya is preparing a new pricing strategy for its crude exports that may include further discounts after a sales offer last week failed because potential buyers offered “unacceptable” prices, according to state-run National Oil Corp.

Libya plans to offer different crude prices before the end of next month that will compensate customers for the additional risk of loading oil in the country, Ahmed Shawki, marketing director at National Oil, said by phone from Tripoli today. The country reduced July export prices for seven grades of crude by as much as $1.90 a barrel, according to a price list from National Oil obtained by Bloomberg News on July 18.

“Tenders were not awarded because the price was unacceptable,” Shawki said. “They were meant to test the market as we prepare a pricing strategy.”

Exports of oil from Libya were disrupted after political feuding closed oilfields and export terminals a year ago. The country produced 300,000 barrels a day of crude last month, about a quarter of the level a year earlier. The Libyan government reached an agreement with rebels on July 2 to reopen Es Sider and Ras Lanuf, the country’s biggest and third-largest export terminals respectively. Zawiya, the nation’s second-biggest oil port, is operational.

“Libya may need to agree to discount its own crude by $1 to $1.50/barrel to be able to sell crude sitting in storage at Es Sider and Ras Lanuf,” Amrita Sen, chief oil markets analyst at Energy Aspects in London, said by e-mail. The oil market is amply supplied and the country’s waxy crude will require extra processing at refineries after sitting in storage for a year, she said.

Shawki declined to indicate if Libya would agree to such a discount. The company is studying the possibility of further discounts, National Oil spokesman Mohamed Elharari said by phone from Tripoli, declining to give a range.

Disruption Risk

“We will take into account the disruption risk for customers, for example by allowing loading flexibility,” Shawki said.

Even after the deal with rebels to reopen ports, shipments have been blocked at Libya’s eastern export terminal of Brega. The government and protesters have yet to agree a date for the facility to reopen, Elharari said.

“There is an agreement to re-open Brega, but there is no agreement on when to implement this agreement,” he said.

Libya’s daily crude production stood at 450,000 barrels today, compared with 550,000 barrels last week, he said.

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