(Bloomberg) -- A spread that shows the difference in oil prices in Europe and Asia surged to the widest in 10 months on concern that swaths of supply from Libya are about to get halted.
The premium of Brent oil futures to Dubai crude swaps, also known as Brent-Dubai exchange of futures for swaps, expanded to about $3 a barrel on Tuesday, according to PVM Oil Associates data. That’s the widest since early October.
Libya has enjoyed a few years of relative peace — and steady output — as the north African country battled to overcome turmoil that followed the ouster of longtime dictator Moammar Al Qaddafi. But longstanding divisions are now coming to the fore again, with authorities in the country’s east annoucing a production halt across the country. At least one field has field has completely shutdown production and two of the biggest Libyan oil companies said they have started gradually cutting production.
Big premiums for Brent could affect global crude flows. They make other grades that are bought and sold at differentials to the North Sea grade more pricey, while Middle East grades become more competitive.
A prolonged absence of Libyan barrels, which are typically light and sweet, could prompt European refiners to snap up alternative cargoes from Africa and America, traders said.
For plants in Asia, it could result in a relative increase in buying of Middle East barrels, which are traded relative to Dubai crude and tend to be more dense and sulfurous.
--With assistance from Sherry Su and Salma El Wardany.