Saharan Blend's increased role as a blending crude for the slew of sourgrades headed to Europe has helped the naphtha-rich grade shrug offchronically low naphtha cracks, market sources said Friday.
In turn, the Algerian crude has halted what appeared in recent months tobe a repeat of 2012 when differentials for the light, sweet grade plungedearly-summer to a record low.
Platts assessed Saharan Blend FOB Algeria at Dated Brent minus $0.80/b,the highest since May 21.
Since falling to its lowest point in 2013 so far of Dated Brent minus$1.30/b on May 30, Saharan Blend differentials have gained a cumulative$0.50/b.
With Russian Urals crude differentials at 10-month highs, sour gradesfrom Iraq, Saudi Arabia and South America are increasingly headed to Europe,sources said.
That influx of sour grades requires greater blending material,particularly for less complex refiners, sources said.
"You can blend Saharan with a heavy sour, and get a medium sour" that insome cases is compatible with -- and cheaper than -- Urals, a source said.
"It makes sense to do it, the question is availability."
Less European availability of Saharan Blend stems from the large volumesthat have already headed to US, Canada and Asia, as well as from the restartof full-operations at the 300,000 b/d Skikda, Algeria refinery, whichconsumes Saharan Blend.
In spring, Saharan Blend appeared to be on track to repeat the recordlow reached last summer, falling a cumulative $1.95/b between April 15 andMay 30.
But in June, rather than continue sharply lower as occurred in 2012,Saharan has rebounded, unusually so for a light grade that usually strugglesduring the summer refining season.
The different year-on-year trajectories is attributed to numerousfactors.
"Last year it was the big impact of shale oil," which sent the region'scrudes lower, a source said.
This year, in addition to greater blending requirements, Saharan Blendhas gained support from production interruptions ranging from West Africa --where long-term force majeure conditions hinder loadings of several Nigeriangrades -- to the North Sea, with its planned and unplanned maintenance.
In addition, "Libya last year was doing better than this year," a sourcesaid.
Libyan oil production -- which had returned output to pre-civil warlevels of 1.6 million b/d in mid-2012 -- has since fallen to below 1 millionb/d as a result of protests at facilities across the country. The result isless exports in July of Libyan crude including the Saharan Blend-like gradeMellitah, sources said.
Algeria's oil company Sonatrach was heard offering late-July barrels atDated Brent minus $0.20/b.
