World Watch -- Comment & Interpretation on Today's News [Libyan Crisis -- Saudi Oil: European Refiners May Prefer Swap Arrangements]

by David Knapp, New York, EI
Saudi Arabia is working hard -- in its typically understated fashion -- to soothe market concerns about possible oil shortages. Last week, the Saudis took a group into the control room of the newly refurbished Khurais field northwest of the giant Ghawar deposit to suggest it could provide higher capacity and higher production than was commonly thought [for information on Khurais, please see my post here -- D.R.]. Riyadh has repeatedly said the kingdom will meet any demand for extra barrels from refiners to replace Libyan outages. Interestingly, however, there does not currently seem to be much demand for Saudi barrels from European refiners who are expected to bear the brunt of the Libyan shortfall. Quality is an issue: spare Saudi Arab "Light" is more of a medium, sour crude compared with Libya's predominantly light, sweet menu. Swaps for Libya-similar West African grades have been suggested, with Saudi barrels instead going to Asian customers. In general, however, the current lack of European interest likely reflects ample stock levels.