The Marine Trade is Discounting Libyan oil.

Libya has been extremely disruptive for oil markets until recently. It now seems that disruptions are contained more inside Libya, (or they still moving world markets but to a lesser extent)…

According to Platts(London),

Shipowners have started asking additional payments from charterers if a crude tanker goes on subjects from Libyan ports like, Mellitah and Zawiyah, shipping sources said. Charterers, shipowners and shipbrokers said there was uncertain availability of cargoes loading out of Mellitah and Zawiyah.

“It is quite uncertain for a shipowner if a cargo will load from the Libyan ports due to civil unrest in Libya,” a charterer said. “The reason being the cargoes may not be available on time, besides this there is always a risk of force majeure at these oil terminals, in which case ship gets canceled.”

-Force Majeure (FM) is an excuse for non-performance in a contract. Charterer and shippers use primary FM to limit their liability for delays that are legitimately beyond his control: Acts of God, Perils at Sea, the Queen’s enemies.

A shipbroker said, “Owners may sit in Libya for weeks, and then get canceled, and have to argue about the cancellation fees.”

“The shipowners don’t want to lose money, and generally ask around $200,000 lump sum from the charterer,” the source said. Shipping sources said shipowners started charging for the ships loading out of Libyan ports recently, and if the situation improves they may stop asking for the additional fees. A few ships were heard to have fixed 80,000 mt crude cargoes earlier this week. There were few cargoes available in Mellitah, shipping sources said. Two Aframaxes were heard to have fixed from Mellitah.


It’s important to recognize that while participants in the energy marine trade have traditional roles (owners or shipper/charterer); the roles can change depending commercial interests.

Cesser and Lien clause states that once Charterer has fulfilled its responsibilities of providing a cargo at the loadport, its responsibilities cease to exist by simultaneously giving the owner a lien on the cargo at the discharge port if Charterer refuses or become unable to pay freight and other charges (demurrage, deadfreight…). If a tanker carrying a oil cargo is in this situation, he may find himself cargo owner.

However, a lien on a cargo can only arise after a cargo is delivered to the vessel and is based on possession ( it is difficult to enforced the lien if oil is delivered at port of discharge).

Tankers Owners ending with many oil cargoes may also ended as oil traders., or trading freight rates vs oil prices at load/disch. ports.

All this said, Owners may prefer to ask the market rate plus a big lumpsum payment and protectives before legging a ship to risky areas or otherwise carry the oil for their own account.

Marine Trade is Discounting Libyan oil for the oil markets.

What if FOB Ex Es-sider  official benchmark is priced at a premium to Dated Brent but the Marine Trade is discounting Libyan oil CIF ?

A $ 200,000 LS on a 80,000 dwt cargo =­ $2.5/mt or $17.5/barrel disc. !!! a WS121 equivalent.

  • At these levels, Aframax owners ballasting in the N.Afr/Euromed region might want to take a risk to buy and carry a spot cargo from Mellitah Terminal for their own account.

According to Bloomberg’s trade sources, Es sider, Libya’s biggest export terminal has a 4.5 millions barrels nameplate storage capacity or between 12 and 20 Days’ Inventory on Hand depending on nearby fields output. Having the certitude that oil is in the tanks leads to the following challenge; is the terminal free of all encumbrances ?

Spot WS Aframax

Spot WS Aframax

Lower rates  suggest limited cargo availability and/or congestion. Higher rates are suggesting cargo availability at Libyan port of calls.

Lumpsum (LS) is a tool used by traders wishing to define their risk exposure on non-conventional oil trades. LS may include voyage related costs like awrp, deviation, LFSO, bunkers, interim ports clause… There is no overage payable in lump sum freight therefore the trader can determine the exact cost per barrel to ship the oil, this feature is quite welcome by back-office departments trying to determine traders’ P/L and risk exposure. 

WS (worldscale) is a unique feature of tanker chartering. It’s a port-to-port dollar per metric ton freight rates for tankers routes. WS rate is a % representation of the flat rate.

Ex: For Rotterdam- El-Brega WS 100=11.73$/MT , WS50= 5.87$/MT  what is WS121 for this trade route ?

© 2014 The Trade, Shipping and Finance Wizard



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