Private traders restart Libyan oil deals

Reuters, Wednesday 13 Apr 2011

Risky transactions are being 'encouraged politically' as resumption of energy exports provides vital lifeline to rebel-held east

Libyan oil trade is picking up after weeks of paralysis despite civil war, trade sources told Reuters, saying political support from the West for Libyan rebels was enabling deals.

The resumption of exports could provide a vital lifeline to Libyan rebels amid heavy fighting with forces loyal to Muammar Gaddafi, the sources said, adding private trading houses would dominate risky deals for the foreseeable future.

"The transactions are certainly being encouraged on the political side," a source close to the process said.

Trading sources told Reuters trade house Trafigura planned to export a cargo of Libyan oil from the port of Brega and Vitol had shipped a gasoline cargo into rebel-held Benghazi.

Vitol and Trafigura declined to comment.

If placed, the Trafigura cargo would be only the second oil shipment to leave Libya after Vitol shipped a cargo to China last week.

Libyan oil exports were halted from early March due to low field production and as oil firms balked at international sanctions and security concerns.

Vitol shipped a cargo of gasoline to the rebel-held port of Benghazi in recent days, shipping sources said on Tuesday, providing rebels with much-needed fuels to continue their war effort. The cargo was shipped from Malta to Benghazi and the oil tanker was fixed last week, the sources said.

A trade source said Vitol was in talks with the rebels to supply them with steady flows of gasoline and was in the process of "working out a deal for the payments."

Traders said they were not surprised that the first Libyan deals had been done by private trading houses, which take greater risks than the listed US and European oil companies which were the biggest buyers of pre-war Libyan oil.

"It does look very much like good old Marc Rich," a veteran oil trader in the Mediterranean said.

The dominant force of oil trading in the 1970-1980s, Rich is still admired in the trading community despite controversy arising from his trade with countries under sanctions, such as Iran, and a US tax evasion case.

With Glencore, the company that evolved from Rich's trading house, about to undergo a public share offering, its arch-rivals Vitol and Trafigura are now the leading risk takers.

"After the IPO, Glencore would become more of a banal public company. Vitol will keep this 'walking on the knife edge' approach," one trader said.

Unlike Glencore, most other traders plan to remain privately held partnerships, which many observers say will keep risk appetite high.

Libya's government has been on the US, EU and UNsanctions lists since March and although rebels have been unofficially excluded from them, oil majors say they it will take a long time before they can start buying oil.

"It is simply non-existent for me at the moment. Even if I'm told that it is definitely not part of the sanctions, I will need to see dozens of things change both inside and outside my company so I can start looking at it again," said a trader with a Western major.

Trading sources told Reuters Trafigura had contacted at least two oil firms to offer a Sarir grade crude sourced from eastern Libya and shipped from Brega.

Brega was previously rebel-held but has been close to the scene of fighting between rebels and forces loyal to Gaddafi.

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