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FEATURE: Light sweet crude differentials in Europe surge amid tight supply


Delivered WTI Midland nears all-time high

Azeri Light demand bolstered by distillate strength

WAF cargoes trading at a rapid pace into Europe

Almost all sweet crude grades in Europe have been racing higher as record product cracks and supply outages encouraged sellers to put their prices up.

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Differentials for WTI Midland arriving into Europe through June and early-July, for example, have surged in recent days.

WTI Midland DAP Rotterdam was assessed at a $4.18/b premium to forward Dated Brent May 12, 70 cents/b higher day on day, and just 3.5 cents/b below the highest value assessed, S&P Global Commodity Insights Data showed.

A shortage of distillates products combined with increased demand for crude at a time of supply outages has given significant support to light sweet crude differentials across Europe.

Indeed, the WTI Midland differential has risen $1.87/b since May 3, the data showed.

There is a "lack of Ekofisk in June, Johan Sverdrup is shorter on maintenance starting in late June and the CPC [Blend] program is pretty short on maintenance," one trader said. "Refining demand adds probably 750,000 b/d of demand back. All in, a supply-demand swing of some 1.5 million b/d tighter in June versus May."

The lack of Libyan exports is expected by some traders to be the dominant driver of support, with distillate-rich sweet Mediterranean and West African grades also seeing strong demand.


All grades in the Mediterranean, outside of Libya, are surging as the supply picture looks tighter following the announcement of planned maintenance at the Kashagan field in Kazakhstan and continued supply outages from Libya.

"The Med market is strong, given the fact that the market is short in crude and product stocks," said one Mediterranean trader.

The Azerbaijani grade is leading the Mediterranean charge bolstered by a lack of competition in the region and soaring diesel cracks. "All products are doing well but it's still nothing to compare to diesel, which leads to big support on Azeri," said a second Mediterranean trader.

Azeri Light was assessed at a $5.50/b premium to Dated Brent on May 12, its highest level since February 2020.

Refiners are having to pay higher differentials in order to guarantee delivery at the prompt, amid continued force majeures at key Libyan terminals.

"There's no volume from WAF and WTI available to achieve delivery in first-half June," said the second Mediterranean trader.

As a result, the Mediterranean market is poised to extend its rally further until Libyan production can return to normal.


Medium sweet West African crude differentials also have neared all-time highs, propelled by their generous middle distillate yields and a strong wave of European buying. Nigerian Escravos was last assessed at a $4.80/b premium to Dated Brent, its highest level in over a decade.

"The pace of trading has increased massively...Nigerians have been taking off quicker than almost I have ever seen," one Nigerian trader said.

Strength in competing Mediterranean crudes and relative calm in Suezmax shipping rates have ensured a favorable arbitrage for WAF crudes. Grades such as Escravos are also being offered on the back of a strong opening to June-loading trade where they enjoyed healthy tender demand from Indonesian refiner Pertamina.

The pull extended to typically eastward facing Angolan grades suffering from a lack of Chinese buying. European demand has brought differentials for light to medium sweet Angolan Girassol and Cabinda back to positive territory, although it has been difficult to compete with Nigerian offerings.